B.A.C. L32 Ins. Fund v. Norwest Tile Co Inc.

NOT RECOMMENDED FOR PUBLICATION
File Name: 05a0973n.06
Filed: December 14, 2005
No. 04-2436
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
TRUSTEES OF THE B.A.C. LOCAL 32
INSURANCE FUND; TILE, TERRAZZO &
MARBLE INDUSTRY PENSION FUND;
GREAT LAKES CERAMIC TILE COUNCIL
FUND; TILE, TERRAZO & MARBLE
INDUSTRY SUPPLEMENTAL
UNEMPLOYMENT BENEFIT FUND; TILE,
TERRAZZO & MARBLE INDUSTRY
VACATION AND HOLIDAY FUND; AND
THE B.A.C. UNION LOCAL NO.32,
Plaintiffs-Appellants,
ON APPEAL FROM THE UNITED
v. STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF MICHIGAN
NORWEST TILE COMPANY, INC., MIAL
CONTRACTING, INC., AND MIAL
PROPERTIES, LLC,
Defendants-Appellees.
/
BEFORE: SILER, CLAY, AND ROGERS, Circuit Judges.
CLAY, Circuit Judge. Plaintiffs, the Trustees for the Tile, Terrazzo & Marble Industry
Fringe Benefit Funds, et. al. (“The Funds”) appeal the district court’s order granting summary
judgment to Defendants, Norwest Tile Company, Inc., et. al. (“Norwest”), alleging that Defendant
Norwest is bound by a current multiemployer collective bargaining agreement (“CBA”), and
No. 04-2436
therefore obligated to contribute to the Funds. For the reasons set forth below, we AFFIRM the
district court’s order.
I. BACKGROUND
Norwest is a residential tile contractor doing business in the Detroit metropolitan area.
According to Defendants, the company currently has only two employees, Stephen Sciantarelli, and
its principal shareholder, Russell D’Angelo. Sciantarelli installs the tile and D’Angelo supervises
the work.
Norwest was a signatory to the 1987-1989 Detroit area tile contract between the BAC Local
Union 32 (“Union”) and the Employer Associations. This agreement, among other things, required
Norwest to make fringe benefit contributions to the Plaintiff Funds. Norwest did not sign any
subsequent contracts, but it adhered to the contracts and contributed to the Funds on behalf of its
employees. At some point, Norwest apparently ceased making contributions and a dispute arose
between the parties over money owed to the Funds.
On May 6, 2002, the Funds filed suit against Norwest and Russell D’Angelo to compel an
audit and to recover fringe benefit contributions that were allegedly owed to the Funds under the
1998-2003 CBA between the Union and the Associations.
The parties reached a settlement agreement in early March 2003. The proposed settlement
agreement was forwarded by Plaintiffs’ counsel to Defense counsel on March 20, 2003. On March
28, 2003, D’Angelo sent the Union notice of Norwest’s withdrawal from multiemployer bargaining
and of its intent to negotiate a new contract individually with the Union. The letter stated in
pertinent part, the following:
2
No. 04-2436
Please treat this letter as notice by Norwest Tile Company of withdrawal by it from
any employer association for purposes of collective bargaining with your union . .
. Norwest Tile will not participate in any negotiations between any employer
association and Local 32 and will not be bound by any new agreement reached
between Local 32 and any employer association. Rather Norwest desires to negotiate
a new collective bargaining agreement with Local 32 on an individual basis.
On March 31, 2003, Plaintiffs’ counsel, Edward J. Pasternak, sent a fax communication to
Defendant Norwest’s counsel, Nancy Harris Pearce, indicating that it was unacceptable to the Funds’
Trustees for Norwest to negotiate individually with the Union. Pearce responded to this
communication by advising Plaintiffs’ counsel during a telephone conversation, that the parties’
settlement agreement did not require Defendant Norwest to execute the subsequent contract; that
Defendant Norwest could not sign the subsequent agreement since such agreement did not exist and
was still being negotiated; and that the trustees of the fringe benefit funds could not compel Norwest
to sign the subsequent agreement.
The settlement was finalized on April 16, 2003. In addition to a cash payout to the Funds,
the terms of the settlement required Norwest to recognize the Union as the exclusive bargaining
representative of its workforce, sign the 1998-2003 CBA with the Union, and submit upon
reasonable notice its books and records to an audit by Plaintiff Funds’ auditors on a periodic basis
as may be required by the CBA. The agreement also included an “Evergreen” or rollover clause
stating the following:
This agreement shall remain in force and effect through May 31, 2003, and shall
continue thereafter unless there has been given not less than 60 days and not more
than 80 days advance notice by Registered or Certified Mail, by either party hereto,
of the desire to modify and amend this Agreement through negotiations. In the
absence of such notice, this Agreement shall renew from year to year thereafter until
the aforesaid advance notice is given.
3
No. 04-2436
Lastly, the agreement contained a clause in which the parties agreed to discharge and release each
other from all future claims related to this matter. The signed documents, along with a check and
the promised employee benefit waivers were forwarded to Plaintiffs’ counsel on April 30, 2003.
In May 2003, Pearce contacted Pasternak via telephone to inquire as to why the order of
dismissal had not been submitted to the court, in accordance with the terms of the agreement.
Pasternak replied that the matter had not yet been submitted for dismissal since Norwest had not
signed or agreed to sign the 2003-2008 CBA. Pearce indicated that signing the 2003-2008
agreement was not part of the settlement, reiterated that Defendants had complied with all terms of
the settlement, and insisted that the order of dismissal be submitted to the court.
Pearce followed this conversation with a letter dated June 10, 2003 restating the before-
mentioned points, and expressing ongoing concern about the fact that the order of dismissal had not
been submitted to the court. She indicated that Defendant Norwest would seek a motion to compel
entry of the order of dismissal if necessary. Plaintiffs’ counsel subsequently submitted the order for
entry on June 19, 2003.
In late June 2003, D’Angelo wrote to the Union renewing Norwest’s request to negotiate
a new CBA with Local 32, and Norwest’s lack of desire to participate in any association-wide
agreement. In response, D’Angelo received a letter from Pasternak on June 30, 2003, stating that
Norwest had recently executed a new CBA as part of the settlement of the 2002 lawsuit, and that
Norwest has no right to bargain on its own with the Union. Pasternak also enclosed a copy of the
2003-2008 agreement, which he insisted that D’Angelo sign. Defendant Norwest’s counsel, Robert
Finkel, responded a couple of days later via letter with the following:
4
No. 04-2436
What Mr. D’Angelo was requested to sign and in fact did sign was the June 1, 1998 -
May 31, 2003 CBA. Indeed, at the time a settlement was reached with the BAC
Funds, a ‘new agreement’ was not even in existence. Moreover you should be aware
that within the limits specified in Article XII of the 1998-2003 CBA, Mr. D’Angelo
gave written notice to the Union that Norwest would not be bound by any new
agreement entered into between Local 32 and any employer association and that it
desired to bargain a new agreement with the Union on an individual basis.
Accordingly, Norwest does not believe it has any obligation to execute and/or
implement the new association agreement with B.A.C. Local 32.
On July 28, 2003, Norwest’s only bargaining unit employee, Stephen Sciantarelli, resigned his
membership in the Union. D’Angelo notified the Union of Sciantarelli’s resignation.
Plaintiffs then asked Norwest to submit to a payroll audit for the period of April 16, 2003
through July 2003. Norwest produced records only for April and May 2003. Norwest refused to
produce any records beyond May 31, 2003. On October 6, 2003, the MIAL Companies were served
with the Complaint in this action.
The Funds filed the complaint from which this appeal is taken on September 25, 2003 in the
United States District Court for the Eastern District of Michigan. Plaintiffs brought suit under
ERISA §§ 502 and 515, 29 U.S.C. §§ 1132 and 1145, alleging that pursuant to the 2003-2008
collective bargaining agreement, Norwest was required to timely submit fringe benefit contributions
to the Funds and submit to an audit of its payroll records in order to confirm these contributions.
Plaintiffs further allege that Norwest was operating potential alter-ego entities, MIAL Contracting
and/or MIAL properties in order to evade its contribution obligations. On November 6, 2003,
Defendant Norwest filed a motion on behalf of MIAL Contracting to dismiss the complaint.
Norwest filed a motion to dismiss on January 9, 2004. The Funds replied and filed a motion
for partial summary judgment on January 23, 2004, requesting that the Court enter an order finding
5
No. 04-2436
that Norwest is bound by the 2003-2008 CBA, or in the alternative, the 1998-2003 Agreement; and
enter an order compelling Norwest to submit to an audit of their books and records by the Fund.
The district court held a hearing on all motions on March 15, 2004. At the hearing, the
district court denied Defendants’ motions for sanctions and motions to dismiss. On April 12, 2004
the district court denied the Funds’ motion for partial summary judgment, stating that it was not yet
prepared to decide the issue, and ordered the parties to conduct discovery.
Again cross motions of summary judgment were filed. On September 28, 2004, the district
court entered a Memorandum Opinion and Order granting Defendant’s motion for summary
judgment and denying Trustees’ motion for partial summary judgment. The district court indicated
that it found no conduct or agreement nullifying Norwest’s March 28, 2003 notice to withdraw from
the CBA, and as such, held that Norwest was not bound to a CBA beyond May 31, 2003.
The Funds appeals the district court’s order granting Defendants’ motion for summary
judgment.
II. DISCUSSION
“We review the district court’s grant of summary judgment in an action involving an ERISA
claim de novo.” Williams v. Int’l Paper Co., 227 F.3d 706, 710 (6th Cir. 2000) (citing Killian v.
Healthsource Provident Adm’rs, Inc., 152 F.3d 514, 520 (6th Cir. 1998)). “Summary judgment is
appropriate so long as the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law.” Williams v. Int’l Paper, 227 F.3d
at 710 (quoting Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir. 1997)). When determining whether
6
No. 04-2436
to reach this conclusion, this Court views the evidence and draws all reasonable inferences in the
light most favorable to the non-moving party. Id; see also Smith v. Thornburg, 136 F.3d 1070, 1074
(6th Cir. 1998).
We agree with the district court’s conclusion that Defendants have no contractual obligations
to Plaintiffs pursuant to the current CBA. The crux of Plaintiffs’ argument seems to be that since
the signing of the 1998-2003 agreement came after the March 28, 2003 withdrawal letter, the signing
of the agreement effectively repudiated the earlier withdrawal. Plaintiffs further argue that because
Norwest did not thereafter provide timely notice of its intent to withdraw, Norwest became bound
to the 2003-2008 agreement pursuant to the earlier agreement’s Evergreen clause. Neither argument
is persuasive.
A.
Defendant Norwest’s March 28, 2003 notice did constitute unequivocal and effective
withdrawal from the multiemployer bargaining unit, and thus Defendant has no obligation to make
further contributions. “Under ERISA § 515, employers . . . who are ‘obligated to make contributions
to a multiemployer plan’ (like the Funds’ plan) must as a matter of federal law ‘make such
contributions.’” Plumbers & Pipefitters Local Union No. 572 Health and Welfare Fund v. A & H
Mechanical Contractors, Inc., 100 Fed. Appx. 396, 400 (6th Cir. 2004) (unpublished) (citing 29
U.S.C. §1145). “An employer’s contractual obligation to make these contributions may arise from
a collective bargaining agreement, including one involving several employers.” Id. However, “‘an
employer may abandon’ a multiemployer bargaining unit and may terminate its obligations to make
ERISA plan contributions ‘if it unequivocally withdraws from the association . . . by communicating
7
No. 04-2436
the intent to withdraw to all parties.’” Id. (quoting Sheet Metal Workers’ Int’l. Ass’n Local 19 v.
Herre Bros. Inc., 201 F.3d 231, 244 (3d Cir. 1999); see also N.L.R.B. v. Sklar, 316 F.2d 145, 150
(6th Cir. 1963).
In Plumbers, the employer sent a letter to both the Union and the Association advising that
the company was withdrawing from the association and that it would no longer be bound by the
CBA. However, the plaintiff Funds claimed that the termination letter was not effective, and
therefore A-H was bound to the new agreement by virtue of the Evergreen provision in the old
expired agreement. This Court upheld the district court’s finding that “A-H’s termination notice
fulfilled the requirements of the 1998 Agreement for termination and that A-H did not become
bound by the 2001 Agreement.” Plumbers, 100 Fed. Appx. at 401. In reaching this conclusion, the
Court considered all evidence that supported the contention that A-H’s withdrawal was both
unequivocal and timely, including the fact that the letter sent by A-H properly expressed their intent
to (1) terminate the 1998 Agreement; (2) not be bound by any future agreements; and (3) withdraw
from both past and future CBAs. Id.
Similarly, in the present case, Defendant Norwest timely and unequivocally withdrew its
bargaining rights from the Association and indicated its intent to bargain independently with the
Union. D’Angelo’s notice letter of March 28, 2003 stated clearly, “Please treat this letter as notice
by Norwest Tile Company of withdrawal by it from any employer association for purposes of
collective bargaining with your union . . . .” He went on to say that “Norwest Tile . . . will not be
bound by any new agreement . . . rather Norwest desires to negotiate a new collective bargaining
agreement . . . on an individual basis.” Norwest did not subsequently participate in any negotiations
8
No. 04-2436
for the new agreement. Norwest merely signed the expiring 1998-2003 CBA as part of the
settlement agreement. Moreover, Norwest repeatedly reiterated (like the defendant in A&H) in
writing to both the Association and the Union that it did not wish to be bound by any subsequent
agreement. As such, Norwest unequivocally and timely withdrew from the CBA and is not bound
by the current agreement.
B.
Defendant’s subsequent conduct was not inconsistent with its stated intent to withdraw from
the agreement. Much of the arguments of both Plaintiffs and Defendants in this case have to do with
whether or not this Court should agree with the district court that the facts at issue here are more
analogous to Haas Elec. v. N.L.R.B., 229 F.3d 23, 28 (1st Cir. 2002) rather than Herre Bros., 201
F.3d 231 (two cases from outside the Sixth Circuit). The two circuits are in agreement that “an
employer’s withdrawal from multiemployer bargaining is nullified when its subsequent actions are
inconsistent with its stated intent to abandon group bargaining.” See Herre Bros., 201 F.3d at 245;
and Haas Elec. 299 F.3d at 28.
An employer’s continued membership in a multiemployer association is not necessarily
inconsistent with its previously stated intent to revoke the association’s bargaining rights. Herre
Bros, 201 F.3d at 245. But an employer may be bound to a multiemployer agreement, even after
effecting a timely withdrawal from an association, by continuing to participate actively in the
association’s negotiations and continuing to observe membership obligations . . . .” Id. The First
Circuit agrees with this notion, but has interpreted this precedent as applying for new contracts, not
an existing contract where the employer is already bound. Haas Elec., 299 F.3d at 30.
9
No. 04-2436
In Haas Elec., the Court found that the employer’s participation in negotiations where
amendments to the existing contract and extended contracts were discussed was not inconsistent
with its previous notice to withdraw from future multiemployer contracts as the employer’s
participation was limited to the discussions regarding the existing contract. Id. at 30-31. In contrast,
however, the Third Circuit in Herre Bros. found the employer’s conduct inconsistent with
revocation of bargaining authority where the employer kept itself informed about the progress of the
multiemployer negotiations and took advantage of the benefits of multiemployer bargaining. Herre
Bros., 201 F.3d at 247.
Although we agree with the district court’s view that the present facts are more analogous
to those in Haas Elec. rather than Herre Bros., we do not believe that this Court has to address the
issue of whether post-withdrawal negotiations serve to nullify withdrawal of new or existing
contracts, because Defendants here did not participate in any post-withdrawal negotiations. In fact,
Defendant Norwest did not engage in any conduct subsequent to issuance of the notice letter that
could be considered inconsistent with its stated intent to withdraw. The CBA that Defendant
D’Angelo signed on April 16, 2003 was the 1998-2003 agreement. Defendant did not sign a new
contract.
The fact that Defendant did not actually sign the existing agreement until after the
termination letter of March 28, 2003 does not serve as nullification of the stated withdrawal.
Defendant signed the existing CBA only as a condition of the settlement agreement between it and
the Funds, and merely fulfilled its obligations under the settlement agreement and the CBA until the
agreement expired on May 31, 2003.
10
No. 04-2436
There is also no evidence that Defendant Norwest participated in ongoing negotiations with
the Association for the new agreement. The record shows undisputed and ample evidence that
Defendant Norwest clearly told Plaintiffs before the settlement agreement was executed or submitted
to the Court that Norwest was only agreeing to be bound by the existing CBA. Statements and
conduct of Defendant Norwest after the agreement was signed were consistent with this position.
As noted above, Defendant Norwest continually repeated their objection to being held bound
by any new contract past the expiration of the 1998-2003 CBA, and insisted that its only obligation
was under the 1998 agreement. Moreover, Defendant D’Angelo patently refused to sign a copy of
the 2003-2008 agreement that Plaintiffs’ attorney forwarded to him on June 30, 2003.
Therefore, the district court properly found that there was no conduct nullifying Defendant’s
March 28, 2003 notice to withdraw from the multiemployer bargaining, and Defendant did not have
to notify Plaintiffs again of its intent to withdraw.
III. CONCLUSION
For the foregoing reason, we AFFIRM the district court’s order granting Defendants’ motion
for summary judgment.
11