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Board of Trustees of IBEW Local Union No. 100 Pension Trust Fund v. Power Design Electric, Inc.

United States District Court, E.D. California

September 10, 2019

BOARD OF TRUSTEES OF IBEW LOCAL UNION NO. 100 PENSION TRUST FUND, et al., Plaintiffs,
v.
POWER DESIGN ELECTRIC, INC., Defendant.

          ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT, DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, AND DENYING DEFENDANT'S MOTIONS TO STRIKE (ECF NOS. 33, 34, 40, 42)

         This action is brought under the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Labor Management Relations Act (“LMRA”) against Defendant, Power Design Electric, Inc. (“PDE”), by Plaintiffs, Board of Trustees of IBEW Local Union No. 100 Pension Trust Fund, Joint Electrical Industry Training Fund, National Electric Benefit Funds, and Family Medical Care Plan (collectively, the “Trusts”).[1] (ECF No. 2.) The Trusts allege PDE breached two different collective bargaining agreements by failing to submit fringe benefit contribution reports and remit fringe benefit contributions. The Trusts also seek an audit or accounting of the records of PDE regarding the time worked by, and the contributions remitted or not remitted for, PDE employees performing work covered by the collective bargaining agreements. (Id.)

         The Court has before it the parties' cross-motions for summary judgment (ECF Nos. 33, 34), PDE's motion to strike the Trusts' reply in support of their motion for summary judgment (ECF No. 40), and PDE's motion to strike the Trusts' reply regarding objections to PDE's motion to strike (ECF No. 42). The Court grants the Trusts' motion for summary judgment (ECF No. 34) and denies PDE's motion for summary judgment (ECF No. 33). As to the motions to strike, the Court denies PDE's motion to strike the Trusts' reply in support of its motion for summary judgment (ECF No. 40), and denies as moot PDE's motion to strike the Trusts' reply regarding objections to PDE's motion to strike (ECF No. 42).

         I. BACKGROUND

         A. PDGP and PDE are formed by John Glover and Robert Glover

         In 2001, John Glover and Robert Glover, father and son, formed the Power Design Electric General Partnership (“PDGP”) to provide electrical contracting services. (ECF No. 33-2 at 2.) John and Robert were both general partners of PDGP. (ECF No. 33-2 at 2.) PDGP remained active and continued to provide electrical contracting services until the inactivation of its California electrical contractor's license in 2006. (ECF No. 33-2 at 2.) From April 2001 until April 23, 2004, PDGP operated as a non-union shop. (ECF No. 33-2 at 2.) As discussed below, on April 23, 2004, PDGP entered § 8(f) pre-hire agreements, converting it into a union shop. In October 2006, PDGP inactivated its California contractor's license and, after that date, PDGP provided no further electrical contracting services and ceased to operate as a going concern. (ECF No. 33-4 at 2.)

         Meanwhile, on October 30, 2003, Power Design Electric Incorporated (“PDE”) was incorporated. (ECF No. 33-4 at 4.) PDE was formed by the general partners of PDGP, John Glover and Robert Glover, for the purpose of providing electrical contracting services. (Id.) John and Robert were the only shareholders in PDE, with John having 51% of the shares and Robert having 49% of the shares. (Id.) John served as the responsible managing officer (“RMO”) of PDE, and continued in that position for the next approximately eleven years.[2] PDE obtained its California electrical contractor's license on December 14, 2004, and that license remains in effect today, with an expiration date of December 31, 2020. (ECF No. 33-4 at 4.)

         B. PDGP Executes Letters of Assent (§ 8(f) Pre-Hire Agreements), then Executes Agreement for Voluntary Recognition, Converting § 8(f) Pre-Hire Agreements into § 9(a) CBAs

         On April 23, 2004, after PDE had been formed but before it had obtained its California electrical contractor's license, PDGP entered into two separate “Letters of Assent-A.” These Letters of Assent-A were executed by John, in his capacity as a general partner of PDGP, and in the presence of Robert. (ECF No. 33-4 at 12, 13.) The First Letter of Assent-A (“First Letter”) authorizes the East Central Chapter-NECA (“NECA”) to act as the collective bargaining unit for PDGP “for all matters contained in or pertaining to the current and subsequent approved Residential Construction agreement between the NECA and Local Union 100, IBEW.” (ECF No. 33-4 at 13.) The Second Letter of Assent-A (“Second Letter”) authorizes the NECA to act as the collective bargaining unit for PDGP “for all matters contained in or pertaining to the current and subsequent approved Inside Wireman's agreement between the NECA and Local Union 100, IBEW.” (ECF No. 33-4 at 12.) Both Letters of Assent also provide that this “authorization, in compliance with the current approved labor agreement, ” is to “remain in effect until terminated by the undersigned employer giving written notice to the [NECA] and to the Local Union at least one hundred fifty (150) days prior to the then current anniversary of the applicable approved labor agreement.” (ECF No. 33-4 at 12, 13.) Finally, in both Letters of Assent, the employer agrees that “if a majority of its employees authorize the Local Union to represent them in collective bargaining, the Employer will recognize the Local Union as the NLRA Section 9(a) collective bargaining agent for all employees performing electrical construction work within the jurisdiction of the Local Union on all present and future jobsites.” (Ibid.) The Letters of Assent constitute § 8(f) pre-hire agreements, as discussed below.

         In December 2004, a majority of PGDP's then current bargaining employees authorized Local Union No. 100 IBEW (“IBEW”) to act as their collective bargaining representative, and on December 15, 2004, PDGP and IBEW entered into an “Agreement for Voluntary Recognition, ” in which IBEW was designated as the employees' collective bargaining representative under Section 9(a) of the NLRA. (ECF No. 33-4 at 15.) The Agreement for Voluntary Recognition provides that, “[b]ased on the showing of majority support, the Employer agrees to recognize the Union . . . as the NLRA Section 9(a) exclusive bargaining representative of all of its employees on all present and future jobsites within the jurisdiction of the Union.” (Id.)

         At the time the Agreement for Voluntary Recognition was executed, PDGP was bound by two collective bargaining agreements (“CBAs”)-the Inside Wireman's Agreement and the Residential Construction Agreement. (ECF No. 33-2 at 4; ECF No. 33-4 at 29-71 (Inside Wireman's Agreement); ECF No. 33-4 at 73-101 (Residential Construction Agreement).) These CBAs require the employer to submit contribution reports to IBEW and remit contributions to the Trusts on a monthly basis. (ECF No. 34-1 at 17-18.)

         As discussed below, the recognition of IBEW as the collective bargaining representative by a majority of PDGP's collective bargaining unit employees converted the CBAs from § 8(f) pre-hire agreements into § 9(a) CBAs as of December 2004.

         C. PDE Obtains its California Contractors License and Begins Performing Obligations Owed under the CBAs

         PDE obtained its California electrical contractor's license on December 14, 2004, the day before the Agreement for Voluntary Recognition was entered into by PDGP. (ECF No. 33-2 at 4-5.) Shortly thereafter, on March 16, 2005, and even though PDE was not a signatory to the Letters of Assent or the Agreement for Voluntary Recognition/§ 9(a) CBAs, PDE began to fulfill the obligations owed by the employer under the CBAs by remitting required contributions to the Trusts and submitting “Monthly Payroll Report[s] - Employee Listing” to IBEW. (ECF No. 33-2 at 5; ECF No. 33-4 at 4.) IBEW also began to dispatch union members to PDE, which PDE employed, pursuant to the terms of the CBAs. (See ECF No. 33-4 at 4-6.) As noted previously, in October 2006, PDGP inactivated its California contractor's license and, after that date, PDGP provided no further electrical contracting services and ceased to operate as a going concern. (ECF No. 33-4 at 2.)

         D. PDE Sends IBEW a Termination Notice and Stops Performing CBA Obligations

         On June 1, 2016, more than eleven years after PDE began performing the obligations owed by the employer under the CBAs, PDE sent a letter (the “Termination Notice”) to both IBEW and NECA stating that “effective immediately” PDE was “terminating the agreements between the IBEW and Power Design Electric.” (ECF No. 33-4 at 20.) The Termination Notice was executed by Robert Glover as President of PDE. (Id.)

         At the time of the Termination Notice, the operative Inside Wireman's Agreement had effective dates of June 1, 2015, through May 31, 2018 (see ECF No. 33-4 at 33; ECF No. 34-1 at 12, 14); and the operative Residential Construction Agreement had effective dates of July 1, 2007, through June 30, 2010, with an evergreen provision that automatically renewed it from year to year unless changed or terminated, such that the agreement had been renewed through June 30, 2016[3] (see ECF No. 33-4 at 33, 79, 103; ECF No. 34-1 at 13, 14). Both the operative Inside Wireman's Agreement and the operative Residential Construction Agreement provide that either party “desiring to change or terminate this Agreement must provide written notification at least 90 days prior to the expiration date of the Agreement or any anniversary date occurring thereafter.” (ECF No. 33-4 at 33, 79.)

         On June 6, 2016, Robert received a letter from legal counsel for IBEW. This letter stated that the Termination Notice was not effective to terminate PDE's obligations and that PDE remained bound by the CBAs. (ECF No. 33-2 at 8; ECF No. 34-1 at 7.) PDE, through Robert, responded with an additional letter to IBEW stating: “Please continue to consider the agreements between [PDE] and IBEW Local 100 to be terminated as previously stated in the letter written by me dated June 1, 2016.” (ECF No. 33-2 at 8.) This letter also stated: “I have given written notice at least 90 days prior to the expiration of such agreement. As directed by the letter of assent - I have given written notice ‘at least 150 days prior to the then current anniversary date of the applicable approved labor agreement.' Therefore there is no reason for the IBEW or NECA to continue to hold my company hostage or oppress my company or my efforts to feed, house, and/or otherwise improve my family.” (ECF No. 33-2 at 8.)

         PDE was designated for a fringe benefit compliance audit for the period of January 1, 2015, through the date of inspection, which was designated as August 31, 2017.[4] (ECF No. 34-1 at 8; 34-6 at 3.) In response to the compliance audit, PDE provided IBEW with some records but stated it was unable to provide IBEW with other requested records. (ECF No. 34-1 at 8; ECF No. 34-6 at 3.) PDE has not submitted any contribution reports, nor remitted any contributions, for the months of July 2016 through May 2018. (ECF No. 34-1 at 18.)

         E. The Trusts File this Action

         On November 2, 2017, the Trusts filed this action against PDE for breach of contract and for an audit or accounting. The Trusts allege that PDE breached the CBAs by failing to submit fringe benefit contribution reports and remit any fringe benefits that are due, and by refusing to submit a complete accounting of PDE's records. The Trusts seek (1) submission of the delinquent reports by PDE and related third parties; (2) an audit or accounting to ascertain whether any further amounts are owed for the delinquency and other time periods; and (3) to the extent further amounts are owed, submission of these further amounts. (ECF No. 2 at 1-2.) The Trusts also seek interest on unpaid amounts owed, and recovery of costs and attorneys' fees.

         On January 18, 2019, the parties filed cross motions for summary judgment. The Court held oral argument on the motions on February 22, 2019. The parties subsequently requested referral to the Court's Voluntary Dispute Resolution Program (“VDRP”). The VDRP process did not result in settlement of the case. (ECF No. 46.) Accordingly, the Court now rules on the parties' cross motions for summary judgment as well as PDE's motions to strike.

         II. PDE's MOTIONS TO STRIKE

         A. PDE's Motion to Strike the Trusts' Reply Regarding Objections to PDE's Motion for Summary Judgment (ECF No. 42)

         PDE moves to strike the Trusts' reply regarding objections to PDE's motion for summary judgment. (ECF No. 40 (the Trusts' reply regarding objections); ECF No. 41 (PDE's motion to strike).) Because, as discussed below, the Court is denying PDE's motion for summary judgment, the Court declines to address the Trusts' objections to that motion. Accordingly, PDE's motion to strike the Trusts' reply filed in support of the objections is denied as moot.

         B. PDE's Motion to Strike the Trusts' Reply in Support of the Trusts' Motion for Summary Judgment (ECF No. 40)

         PDE moves for an order striking all or a portion of the Trusts' reply in support of summary judgment because the reply exceeds the length limitations imposed by the Court's Standard Procedures.[5] (ECF No. 39 (the Trusts' reply); ECF No. 40 (PDE's motion to strike).)

         The Court's Standard Procedures provide that unless prior leave of Court is obtained, “[r]eply briefs by the moving party shall not exceed ten (10) pages.” Section 1.d. of Standard Procedures for U.S. Magistrate Judge Erica P. Grosjean. Here, the Trusts filed a reply brief that is nineteen pages long and did not seek leave of the Court prior to doing so. The Trusts have thus violated the Standard Procedures.

         In response to PDE's motion to strike, the Trusts explain that they were unaware of the page limits imposed under the Standard Procedures and that the filing of the overlength reply was inadvertent and nonwillful. (ECF No. 43.) The Trusts further explain that in their reply brief, they essentially reiterate the contents of their opposition to PDE's motion for summary judgment and that they provided this reiteration in their reply brief as a convenience to the Court. Finally, the Trusts explain that they included “signposts” in the reply brief that inform the Court where arguments had previously been made in their opposition to PDE's motion for summary judgment and that this was done in an attempt to reduce the burden on the Court. (Id.)

         The Court expects all parties appearing before it to both be familiar with and comply with all Court rules and procedures, and a party's lack of familiarity does not justify a violation of those rules and procedures. The Court does not, however, find that striking or partially striking the Trusts' overlength reply brief is warranted here and therefore denies the motion to strike. The Court cautions the parties that while it is being flexible about this violation, future violations of Court procedures or rules will be met with less tolerance.

         III. MOTIONS FOR SUMMARY JUDGMENT (ECF Nos. 33, 34)

         A. Summary Judgment Standard

         Summary judgment in favor of a party is appropriate when there “is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Albino v. Baca, 747 F.3d 1162, 1169 (9th Cir. 2014) (en banc) (“If there is a genuine dispute about material facts, summary judgment will not be granted.”). “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by (A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1).

         A party moving for summary judgment “bears the initial responsibility of informing the . . . court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). If the moving party moves for summary judgment on the basis that a material fact lacks any proof, the court must determine “whether a fair-minded jury could reasonably find for the [non-moving party].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986) (“The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.”). “[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex, 477 U.S. at 322. “[C]onclusory allegations unsupported by factual data” are not enough to rebut a summary judgment motion. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989) (citation omitted).

         In reviewing a summary judgment motion, the Court may consider other materials in the record not cited to by the parties, but is not required to do so. Fed.R.Civ.P. 56(c)(3); Carmen v. San Francisco Unified School Dist., 237 F.3d 1026, 1031 (9th Cir. 2001).

         In judging the evidence at the summary judgment stage, the Court “must draw all reasonable inferences in the light most favorable to the nonmoving party.” Comite de Jornaleros de Redondo Beach v. City of Redondo Beach, 657 F.3d 936, 942 (9th Cir. 2011). It need only draw inferences, however, where there is “evidence in the record . . . from which a reasonable inference . . . may be drawn”; the court need not entertain inferences that are unsupported by fact. Celotex, 477 U.S. at 330 n.2. But, “if direct evidence produced by the moving party conflicts with direct evidence produced by the nonmoving party, the judge must assume the truth of the evidence set forth by the nonmoving party with respect to that fact.” Leslie v. Grupo ICA, 198 F.3d 1152, 1158 (9th Cir. 1999) (citation omitted).

         B. Summary of Parties' Arguments

         1. PDE's Motion for Summary Judgment

         PDE argues that it is entitled to summary judgment because it lawfully terminated the collective bargaining agreements. PDE is not contending that the terms of the CBAs themselves allowed PDE to terminate; instead, PDE contends that it simply is not bound by the terms of the CBAs. First, PDE argues that it had only one permanent employee from April 2014 until June 2016 and that, under the “one-employee-unit rule, ” PDE was able to lawfully repudiate the CBAs effective immediately upon IBEW and NECA's receipt of the Termination Notice.

         Second, PDE argues alternatively that, as the alter ego successor to PDGP, it could lawfully terminate its agreements with IBEW and NECA effective immediately upon IBEW and NECA's receipt of the Termination Notice.

         Third, PDE argues that, assuming that the CBAs were not terminated immediately upon IBEW's receipt of the Termination Notice, the Termination Notice was sent more than 150 days in advance of the Inside Wireman's Agreement's then-current anniversary date of May 31, 2018, and more than 150 days in advance of the Residential Construction Agreement's then current anniversary date of June 30, 2017, and thus terminated the CBAs on their respective anniversary dates.

         The Trusts argue that PDE cannot successfully invoke the one-employee-unit rule because PDE did not employ employees pursuant to a § 8(f) pre-hire agreement.[6] The Trusts also argue that PDE was bound by the CBAs due to its admitted status as an alter ego successor employer of signatory PDGP; and, alternatively, that PDE was bound by the substantive terms of the CBAs because PDE assumed PDGP's obligations under the CBAs. The Trusts do not dispute that PDE's Termination Notice was received by IBEW more than 150 days prior to the anniversary dates of the Inside Wireman's Agreement (May 31, 2018) and the Residential Construction Agreement (June 30, 2017), and that the agreements were therefore terminated on those respective anniversary dates.

         2. The Trusts' Motion for Summary Judgment

         The Trusts seek summary judgment on their two claims for relief-breach of contract and accounting-and also as to the various affirmative defenses raised by PDE.

         The Trusts argue that they are entitled to summary judgment on their first claim that PDE breached the CBAs by failing to submit contribution reports and remit contributions as required by the CBAs. The Trusts contend that PDE remained bound by the CBAs until the CBAs' respective expiration dates, that the CBAs required PDE to submit reports and remit contributions, and that PDE failed to comply with those requirements.

         The Trusts argue that they are also entitled to summary judgment on their second claim, which seeks an audit or accounting of PDE's records. The Trusts contend that the trust agreements as well as federal law permit the audit or accounting of PDE's records, and PDE is required to cooperate with the audit and pay any contributions ascertained by the audit and related charges for the periods during which the CBAs were in effect.

         Finally, the Trusts request a court order establishing certain material facts. (ECF No. 34-2 at 22-24.)

         As discussed in more detail above, PDE argues that it was entitled to terminate the CBAs under the one-employee-unit rule, that PDE was not bound by the CBAs under either the theory of alter ego or successor liability, and that PDE did not assume the obligations under the CBAs. PDE further argues that, should the court decline to grant summary judgment in its favor, there are at a minimum genuine issues of material fact that preclude granting summary judgment in favor of the Trusts.

         C. Whether PDE Could Terminate the CBAs under the One-Employee-Unit Rule

         PDE contends that it was entitled to immediately terminate the CBAs under the “one-employee-unit rule.” The Trusts respond that the one-employee-unit rule is inapplicable here because PDE did not employ its employees pursuant to a § 8(f) pre-hire agreement but, instead, employed the employees under a § 9(a) agreement.

         1. Section 8(f) Pre-Hire Agreements versus Section 9(a) Agreements

         Section 8(f) of the National Labor Relations Act (“NLRA”) authorizes a “pre-hire” collective bargaining agreement between an employer and a union.[7] “Unlike typical collective bargaining agreements formed under § 9(a), a ‘pre-hire agreement is a contract agreed to by an employer and a union before the workers to be covered by the contract have been hired.'” Baker Concrete Const., Inc. v. Reinforced Concrete Contractors Ass'n, 820 F.3d 827, 832 (6th Cir. 2016) (quoting Int'l Ass'n of Bridge, Structural, & Ornamental Iron Workers, Local 3 v. NLRB, 843 F.2d 770, 773 (3d Cir. 1988)). Pre-hire agreements set the terms and conditions of employment, and recognize the union as the exclusive bargaining representative, for workers who, upon employment, will be engaged in the construction industry. Jim McNeff, Inc. v. Todd, 461 U.S. 260, 265-66 (1983); Baker Concrete, 820 F.3d at 832. Thus, although the general rule is that such an agreement would be illegal because it purports “to tie employees to a majority representative-i.e., labor union-without the majority of the employees selecting and ratifying which organization they wish to represent their interests, ” the construction industry has been granted an exception to this general rule. Baker Concrete, 820 F.3d at 832. The reason for this exception is the unique character of the construction industry:

[B]ecause general contractors and other employers in the construction industry do not hire and keep employees and subcontractors on the same permanent basis as other employers do, it is necessary for these employers to have more flexibility in their bargaining contracts and union relations. Without the ability to enter into prehire agreements, contractors would be unable to submit informed and accurate bids for construction projects because they would not have any certainty regarding their employee expenses and personnel ...

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