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Operating Engineers' Health and Welfare Trust Fund for Northern California v. Vortex Marine Construction, Inc.

United States District Court, N.D. California

September 4, 2019

OPERATING ENGINEERS' HEALTH AND WELFARE TRUST FUND FOR NORTHERN CALIFORNIA, et al., Plaintiffs,
v.
VORTEX MARINE CONSTRUCTION INC., Defendant. Contribution Account No. Amount Due Date past due Date paid Days Late Annual Interest Daily Interest Total Interest

          ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT Re: Dkt. No. 66

          KANDIS WESTMORE United States Magistrate Judge

         On June 22, 2017, Plaintiffs filed the instant case against Defendant Vortex Marine Construction, Inc., alleging that Defendant failed to pay contributions for hours worked by its employees, as required by the Bargaining and Trust Agreements and the Employee Retirement Income Security Act (“ERISA”). (Compl. ¶¶ 15, 20.) Pending before the Court is Plaintiffs' motion for summary judgment, seeking interest and liquidated damages on late-paid contributions, as well as reasonable attorney's fees and costs. (Plfs.' Mot. for Summary Judgment, Dkt. No. 66.)

         Upon consideration of the parties' filings and relevant legal authorities, as well as the arguments presented at the August 29, 2019 hearing, and for the reasons stated below, the Court GRANTS IN PART and DENIES IN PART Plaintiffs' motion for summary judgment.

         I.BACKGROUND

         Plaintiffs are employee benefit plans and their respective trustees. (Minser Decl. ¶ 2, Dkt. No. 67.) Defendant is an employer, and a member of the Dredging Contractors Association (“DCA”) and Associated General Contractors of California, Inc. (“AGC”). (Brown Decl. ¶¶ 4, 6, 8, Exhs. A (“2013 Master Dredging Agreement”) at 14, B (“2016 Master Dredging Agreement”)

         A. Bargaining Agreements

         On June 26, 2013, the DCA and the Operating Engineers Local No. 3 of the International Union of Operating Engineers, AFL-CIO (the “Union”) entered into a collective bargaining agreement, the Master Dredging Agreement Clamshell and Dipper Dredge and Hydraulic Suction Dredge Agreement (“2013 Master Dredging Agreement”). (Brown Decl. ¶ 3.) On July 26, 2016, the DCA and the Union entered into the 2016 Master Dredging Agreement. (Brown Decl. ¶ 5.) Both Master Dredging Agreements impose liquidated damages of the greater of $35.00 or 15% of the amount due and interest at the rate of 12% per annum on unpaid contributions. (2013 Master Dredging Agreement § 15.01.00; 2016 Master Dredging Agreement § 15.01.00.) Payments are due by the 15th day of the month following the month the work was performed, and are considered delinquent if not received by the bank prior to midnight of the 25th day of that month. (2013 Master Dredging Agreement § 12.01.00; 2016 Master Dredging Agreement § 12.01.00.) Additionally, both Master Dredging Agreements state that all contribution payments:

shall be made . . . in the manner provided for by the applicable Employer-Union Trust Agreement creating a Trust or, if not a Trust, at the time and in the manner provided for in this agreement. Each Individual Employer is bound by all the terms and conditions of each Trust Agreement and any amendment or amendments thereto which are incorporated by reference herein.

(2013 Master Dredging Agreement § 12.01.00; 2016 Master Dredging Agreement § 12.01.00.)

         Around July 1, 2013, the AGC entered into the 2013-2016 Master Agreement with the Union. (Brown Decl. ¶ 8.) On July 1, 2016, the AGC entered into the 2016-2020 Master Agreement with the Union. (Brown Decl. ¶ 10.) Both Master Agreements state:

The parties recognize and acknowledge that the regular and prompt payment of amounts due to the Trust Funds by Individual Employers is essential to the efficient and fair administration of the Trust funds and the maintenance of plan benefits, and that the Boards of the Trustees of the Trust Funds have established a reasonable, diligent, and systematic collection process. If Individual Employers do not make timely payments, the Trust Funds lose the investment return they should have received, and incur additional administrative expenses in the form of letters, telephone calls, and other collection expenses. In addition, the Trust Funds incur additional management expense by reason of time necessary to oversee the collection process by the Board of Trustees, Executive Director, and others. The Trust Funds are also delayed or prevented from processing claims by employers for benefits under the plan.

         (Brown Decl., Exh. D (“2013 Master Agreement”) § 12.13.00; Exh. E (“2016 Master Agreement”) § 12.13.00.) To this end, the Master Agreements impose liquidated damages on unpaid contributions in the amount of 10%. (2013 Master Agreement § 12.13.01; 2016 Master Agreement § 12.13.01.) If, however, a lawsuit is filed to collect delinquent contributions, the amount of liquidated damages is typically increased to 20% of the unpaid contributions. (Id.) Additionally, unpaid contributions accrue interest charges at the rate of 10% per year simple interest. (2013 Master Agreement § 12.13.02; 2016 Master Agreement § 12.13.02.) Contributions are due by the 15th day of the month following the month during which work was performed or paid; payments are considered delinquent if not received by the 25th day of the month following the month during which work was performed or paid. (2013 Master Agreement § 12.01.02; 2016 Master Agreement § 12.01.02.) Like the Master Dredging Agreements, the Master Agreements incorporate the terms of the applicable Trust Agreement creating a Trust Fund. (2013 Master Agreement § 12.01.03; 2016 Master Agreement § 12.01.03.)

         On May 24, 2010, the AGC entered into the Seventeenth Amendment to the Trust Agreement establishing Plaintiff Pension Trust Fund for Operating Engineers. (Brown Decl., Exh. F (“Trust Agreement Amendment”) at 1, 3.) The Seventeenth Amendment amended the provisions regarding delinquent contributions. Like the Master Agreements, the Seventeenth Amendment recognizes that when individual employers fail to make timely payments, the Trust Fund suffers certain administrative expenses, similar to those stated by the Master Agreement. (Id. § 10(A).) In recognition of these harms, liquidated damages are set at 10% of the unpaid contributions prior the filing of a lawsuit, and 20% of the unpaid contributions. (Id. § 10(A)(3).) Interest accrues at the rate of 10% per year simple interest. (Id. § 10(A)(4).) Payments are delinquent if not received by the 25th day of the month immediately following the month in which the work was performed. (Id. § 10(A)(2).)

         B. Payment and Audit History

         Defendant is required to submit two separate contribution reports per month for account numbers 088410-23 and 088409-59. (Brown Decl. ¶ 17.) On June 22, 2017, Plaintiffs filed the instant suit based on Defendant's failure to pay contribution for hours worked by its employees between August 2016 and April 2017. (Compl. ¶ 15.)

         Plaintiffs have a dedicated lockbox at Fremont Bank in Hayward, California, where employers mail monthly contribution reports and payments for processing. (Supp. Brown Decl. ¶ 3, Dkt. No. 78.) Upon receipt by the lockbox, every document is imaged and electronically stamped at the top left corner of each payment with the date the document is processed (received) by the bank. Plaintiffs routinely rely on the Fremont Bank deposit images to determine when payments were received by the bank. (Supp. Brown Decl. ¶ 3.)

         i. Payment History

         Plaintiffs assert that Defendant was delinquent in paying its July 2013, October through December 2013, August 2014, October 2014, March 2015, October 2015 through February 2016, August 2016 through October 2016, November 2016 through December 2016, January 2017 through April 2017, July 2017 through December 2017, January 2018, March 2018, and November 2018 contributions late. (Brown Decl. ¶ 18.) In support of their motion, Plaintiff provide a declaration stating the amount due, due date, payment date, and calculated liquidated damages and interest for each of these contributions. (Brown Decl. ¶¶ 19-69.) On reply, Plaintiff also provides copies of the Fremont Bank deposit images indicating when payments were received and processed, as well as occasional envelopes indicating mailing dates. (See Supp. Brown Decl., Exhs. A-Y.) Additionally, Plaintiff indicates that some contributions were made via partial payments; for many of the contributions, Plaintiffs do not indicate the amount of the partial payment. (See Brown Decl. ¶¶ 49-56, 58, 60-67; Supp. Brown Decl. ¶¶ 21-25, 27-33.)

         Defendant asserts that its records show different payments between September 2013 and January 2014. Specifically, Defendant states that a $12, 250.66 check was mailed on September 3, 2013, a $38, 692.99 check was mailed on November 22, 2013, a $50, 743.77 check was mailed on December 23, 2013, and a $54, 828.45 check was mailed on January 23, 2014. (Fettig Decl. ¶¶ 14-15, Dkt. No. 73.) These check amounts do not match the Fremont Bank deposit images. (E.g., Supp. Brown Decl., Exh. A ($40, 834.11 check processed on September 16, 2013), B ($53, 411.87 check processed on January 21, 2014), C ($43, 435.10 check processed on November 29, 2013).)

         All outstanding contribution payments have been paid. (Fettig Decl. ¶ 12; Minser Decl. ¶ 25, Dkt. No. 67.)

         ii. January 1, 2014 through December 31, 2015 Audit

         At an unknown time, an audit of Defendant's records was conducted for the period between January 1, 2014 and December 31, 2015. (Fettig Decl. ¶ 3; Williams Decl. ¶ 4, Dkt. No. 75.) Although the auditor requested complete payroll records, only W2s were provided. (Williams Decl. ¶ 5.) The audit was conducted primarily by comparing the W2s to the fringe benefit contributions reported by Defendant. (Williams Decl. ¶ 6.) The audit results were provided to Defendant on October 27, 2017. (Fettig Decl. ¶ 3; Williams Decl. ¶ 4.)

         Defendant asserts that it found the results were false because employees disclosed in the audit report did not actually work for Defendant during that period. (Fettig Decl. ¶ 3.) Shortly thereafter, Defendant's CEO, Blaise Fettig, invited Trustee Dave Harrison to review the payroll records. (Fettig Decl. ¶ 4.) Trustee Harrison reviewed the records and agreed that the audit results were false. (Fettig Decl. ¶ 5.) Plaintiffs, however, continued to include amounts from the audit in their claimed amounts. (Fettig Decl. ¶ 6.) Mr. Fettig told Trustee Harrison that he would be willing to make payments reserving the right to dispute the audit, and Trustee Harrison “indicated that he would pass along [the] offer to their attorney.” (Fettig Decl. ¶¶ 7-8.) Defendant received no response. (Fettig Decl. ¶ 8.) Although Defendant was willing and able to make timely payments in 2017 and 2018, it believed it “could not reasonably make the payments, as such [payments] could have been applied to false and disputed sums stemming from the audit.” (Fettig Decl. ¶ 9.)

         Plaintiff responds that on May 10, 2018, Mr. Fettig directly e-mailed Plaintiff's counsel, Matthew Minser, asking for more information about the audit. (Supp. Minser Decl., Exh. A, Dkt. No. 76.) Mr. Fettig stated: “You have indicated that $25, 040.15 was underpaid for that period but our records do not agree. Can you please provide greater detail on this issue?” (Id.) That same day, Mr. Minser sent the audit report to Defendant's counsel. (Supp. Minser Decl., Exh. B.) On May 21, 2018, Defendant's counsel responded that Defendant believed the audit results were incorrect, and asked how to reconcile the discrepancy. (Supp. Minser Decl., Exh. C.) Mr. Minser explained that “dispute documentation (including any backup to substantiate the dispute) should be submitted directly” to Mr. Minser, who would forward it to the auditor. (Supp. Minser Decl., Exh. D.) Mr. Minser did not receive the audit dispute ...


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