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Trustees of the Seiu Local 1877 and San Diego County Employers v. Kleenhouse Building Maintenance

July 22, 2011

TRUSTEES OF THE SEIU LOCAL 1877 AND SAN DIEGO COUNTY EMPLOYERS
SECURITY TRUST FUND,
PLAINTIFF,
v.
KLEENHOUSE BUILDING MAINTENANCE, INC., DEFENDANT.



The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge

ORDER GRANTING-IN-PART AND DENYING-IN-PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT [DOC. 9]

Pending before the Court is Plaintiff Trustees of the Service Employees International Union ("SEIU") Local 1877 and San Diego County Employers Security Trust Fund's ("Trustees") summary-judgment motion against Defendant Kleenhouse Building Maintenance, Inc. ("KBM"). KBM opposes the motion.

The Court decides the matter on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). For the following reasons, the Court GRANTS Plaintiffs' summary-judgment motion on the issue of KBM's contractual obligation to submit to the audit, but DENIES Plaintiffs' request for an order requiring KBM to unconditionally produce the requested documents.

I. BACKGROUND

The SEIU Local 1877 and San Diego County Employers Security Trust Fund is an express trust created by Collective Bargaining Agreements ("CBAs") between the SEIU Local 1877 ("Union") and various employers. (Compl. ¶ 3 [Doc. 1].) The trust is a multi-employer benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1002(37)(A). (Id.) Plaintiff Trustees are the trustees and fiduciaries of the trust. (Id. ¶ 4.) Defendant KBM is a national janitorial and maintenance service company. (Def.'s Opp'n 3:3--4 [Doc. 11].) Some of the sites KBM services are union sites, and some of the union members at those union sites are members of the SEIU Local 1877. (Id. at 3:5--6.)

In 2005, the Union and KBM entered into a CBA effective July 2, 2005 through May 31, 2008. (See Bautista Decl. Ex. C [Doc. 9-2].) In 2006, the parties executed a Trust Acceptance and Contract Data Form ("Trust Acceptance"). (See Bautista Decl. Ex. A.) At the time KBM signed the Trust Acceptance, approximately 35 of its 193 total employees were SEIU Local 1877 members covered by the CBA. (Id.) In signing the Trust Acceptance, both parties acknowledged the existence of the CBA and "agree[d] to be bound by the Agreement and Declaration of Trust of the SEIU Local 1877 and San Diego County Employers Security Trust Fund ["Trust Agreement"] currently in effect, and all changes, amendments, restatements and other alterations thereof, and all the rules and regulations of the Trust Fund." (Id.)

The Trust Agreement was drafted in 2002. (See Bautista Decl. Ex. B at vi.) Although KBM agreed to be bound by the Trust Agreement when it signed the Trust Acceptance, KBM did not sign the Trust Agreement. (Def.'s Opp'n 3:21--25.) KBM also was not provided with a copy of the Trust Agreement or any current or future amendments to it. (See Tucker Decl. Ex. 9 [Doc. 11-1].)

Article III, Section 6 of the Trust Agreement governs the Trustees' authority to audit employers. (Bautista Decl. Ex. B at 9.) Effective January 1, 2006, this section was amended. (See Bautista Decl. Ex. B.) The amended section reads in relevant part:

The Board of Trustees has the power to require any Employer, signatory Association, Union, any employee, any medical or other service provider, or any participant or beneficiary under the Benefit Plans, to submit to it any information, data, or documents relevant to and suitable for the purposes of the Board's administration of the Benefit Plans.

The following are only some examples of documents and information which are relevant and suitable for the purposes of the Board's administration of the Benefit Plans, and must be produced by Employers subject to an employer audit by the Trust; such documents and information which must be produced include information and records pertaining not only to employees concededly covered by the Benefit Plans but those pertaining to persons who the employer claims are not so covered: All payroll records and employee records, including but not limited to . . . 1099 and 1096 forms, . . . vendor's invoices, . . . [and] accounts payable journals . . .

The parties to this Trust Agreement agree that they will use their best efforts to secure compliance with any reasonable request of the Board for any such information, data, reports or documents. The Trustees shall have the right themselves or through any authorized representative, to enter upon the premises of, and audit the books and records of, any Employer as may be necessary to determine if all liabilities of such Employer to the Trustees have been paid, and to determine that the correct contributions have been received for all persons for whom the Employer is required to make contributions. The Employer shall make such books and records available at all reasonable times and places so that such audits may be conducted.

(Id.) (Language added per the 2006 amendment has been italicized.)

On May 13, 2010, National Compliance Services ("NCS")-a company hired by the Trustees to audit KBM-sent a letter to KBM requesting documents necessary to complete an audit on behalf of the Union. (Byerley Decl. ¶ 2; Ex. 18 [Doc. 11-3].) From May until September 2010, KBM provided all the documents requested by NCS. (Byerley Decl. ¶¶ 3--4.) On September 22, 2010, NCS sent KBM an e-mail requesting three new documents: a complete list of KBM's work locations, a list of KBM's 1099 forms, and KBM's vendor list/accounts payable ("the disputed documents"). (Id. ¶ 4.) Shortly after receiving NCS's e-mail, KBM received a letter from the Union's counsel dated September 21, 2010. (Id. ¶ 5; Ex. 4.) The letter requested that KBM send the disputed documents by September 27, 2010, or the Trustees would "initiate a lawsuit against KMB [sic] without further notice." (Byerley Decl. Ex. 4.)

KBM was concerned about providing the disputed documents, and wanted to obtain legal advice before producing the documents. (Byerley Decl. ¶¶ 6, 8.) Furthermore, KBM's human services director, who was in charge of responding to the audit, was out of the office for much of the period between September 21, 2010, and October 15, 2010. (Id. ¶¶ 1, 4, 6.) Consequently, KBM did not turn over the disputed documents by September 27, 2010. By October 15, 2010, the disputed documents were the only documents requested by NCS that KBM had not yet turned ...


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