Electrical Construction Indust v. Veterans Electric, LLC

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 19-1051 and 18-3703
ELECTRICAL CONSTRUCTION INDUSTRY
PREFUNDING CREDIT REIMBURSEMENT
PROGRAM, et al.,
Plaintiffs-Appellants,
Cross-Appellees,
v.
VETERANS ELECTRIC, LLC,
Defendant-Appellee,
Cross-Appellant,
Appeals from the United States District Court for the
Eastern District of Wisconsin.
No. 2:17-cv-01576-NJ — Nancy Joseph, Magistrate Judge.
SUBMITTED SEPTEMBER 4, 2019 — DECIDED OCTOBER 24, 2019
Before WOOD, Chief Judge, and BAUER and HAMILTON,
Circuit Judges.
2 Nos. 19-1051 and 18-3703
BAUER, Circuit Judge. The International Brotherhood of
Electrical Workers, AFL-CIO Local 494 and the Electrical
Contractors Association Milwaukee Chapter, N.E.C.A., Inc.
(“NECA”), entered into a collective bargaining agreement
(“CBA”) providing health, welfare, and pension benefits for
union workers. The Electrical Construction Industry Pre-
funding Credit Reimbursement Program, a/k/a Electrical
Construction Industry Health & Welfare Plan, Electrical
Construction Industry Annuity Plan, Electrical Construction
Industry Pension Plan, Milwaukee Electrical Joint Apprentice-
ship & Training Trust Fund, and Electrical Construction
Industry Vacation – Holiday Plan (the “Funds”) operate as
trusts for these benefits. Veterans Electric, LLC (“Veterans”)
participated in NECA, assented to the CBA, and contributed to
the Funds for its union employees. The CBA makes multiple
references to the Funds and details an audit policy.
The Employee Retirement Income Security Act of 1974
(“ERISA”) governs benefit plans between labor unions and
multiemployer associations. As association members, employ-
ers agree to be bound by the CBA. Unions set up trust agree-
ments, which set out the terms for benefit plans for union
employees. Trustees may demand and examine pertinent
employer records to effectively administer the trust. Signatory
employers self-report benefit payments owed under the CBA.
On May 4, 2017, the Funds attempted to audit Veterans’
payroll records and Veterans only provided records for union
employees. This payroll information accounted for about half
of the total reported wages. Due to the discrepancy, the Funds
requested payroll information for non-union employees.
Veterans refused, contending that the records were outside the
Nos. 19-1051 and 18-3703 3
scope of a proper audit under the CBA. The Funds were unable
to complete the audit and initiated litigation. During discovery,
Veterans provided the additional payroll information.
The district court granted summary judgment in favor of
Veterans, limiting the scope of the trustees’ audit authority. For
the following reasons, we reverse.
DISCUSSION
We review the district court’s grant of summary judgment
de novo, construing all factual disputes and reasonable infer-
ences in favor of the nonmovant. Landmark Am. Ins. Co. v.
Deerfield Constr., Inc., 933 F.3d 806, 806 (7th Cir. 2019). Sum-
mary judgment is appropriate when the movant has shown
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).
Prior to the merits, we first address Veterans’ argument
that once it furnished the payroll records to the Funds in
discovery, and the Funds dismissed the original fraud charges,
this case became moot. Rather than being moot, there exists a
live dispute between the parties over attorney’s fees. A fee
award under ERISA, 29 U.S.C. § 1132(g), requires at least
“some degree of success on the merits.” Hardt v. Reliance
Standard Life Ins. Co., 560 U.S. 242, 245 (2010) (quoting
Ruckelshaus v. Sierra Club, 463 U.S. 680, 694 (1983)); see also
Pakovich v. Verizon Ltd. Plan, 653 F.3d 488, 494 (7th Cir. 2011).
Here, Veterans complied with the Funds’ request for pertinent
audit information after not only the threat, but the reality, of
litigation. Because the Funds’ right to pursue attorney’s fees
4 Nos. 19-1051 and 18-3703
remains cognizable, this appeal remains ripe for adjudication
and we move to the merits.
The Supreme Court discussed this issue in Cent. States,
Southeast & Southwest Areas Pension Fund v. Cent. Transp., Inc.,
472 U.S. 559 (1985), where an employer refused to share non-
union employee payroll information with the union trustees.
Union trustees relied on employers, multiemployer association
participants that are signatory to a CBA, to self-report the
extent of liability. Id. at 561. Unions police employer self-
reporting through random audits. Id. Certain employers
refused to produce “payroll, tax, and other personnel records”
of non-union employees for audit purposes. Id.The Supreme Court held that the “audit requested by [the
trustees was] well within the authority of the trustees as
outlined in the trust documents.” Id. at 581. The trustees have
the “right to conduct this particular kind of audit, [but it is] not
their duty to do so.” Ibid. (emphasis in original). In particular,
“the trust documents included a number of provisions that are
highly supportive of the right to audit by [the] trustees.” Id. at
565. Furthermore, “an examination of the duties of plan
trustees under ERISA, and under the common law of trusts
upon which ERISA’s duties are based, makes clear that the
requested audit is highly relevant to legitimate trustee con-
cerns.” Id. at 569.
ERISA clearly assumes that trustees will act to
ensure that a plan receives all funds to which it
is entitled, so that those funds can be used on
behalf of participants and beneficiaries, and that
trustees will take steps to identify all partici-
Nos. 19-1051 and 18-3703 5
pants and beneficiaries so that the trustees can
make them aware of their status and rights
under the trust’s terms.
Id. at 571–72.
The Ninth and Eleventh Circuits also accordingly held that
benefit-plan trust agreements are sufficient to provide a right
of audit even if a CBA is silent, and that a CBA cannot restrict
fund trustees’ audit rights. Santa Monica Culinary Welfare Fund
v. Miramar Hotel Corp., 920 F.2d 1491, 1493–95 (9th Cir. 1990)
and Plumbers and Steamfitters Local No. 150 Pension Fund v.
Vertex Constr. Co., 932 F.2d 1443, 1450–52 (11th Cir. 1991).
Here, as part of a multiemployer association, Veterans
became a signatory employer and bound to these Trust
Agreements. Certain sections of these agreements explicitly
bind the employer to provide relevant information in connec-
tion with administering the Funds “as deemed necessary by
the Trustees” and give authority to the Trustees to “seek
appropriate legal, equitable and administrative relief.” The
Trust Agreements give the trustees the right to audit and are
referenced multiple times throughout the CBA. One provision
of the CBA specifically states:
The Employer shall promptly furnish to the
authorized certified public accountant auditors
employed by the Trustees of any fringe benefit
fund, on demand, all necessary employment,
personnel or payroll records, and these records
only, relating to its former and present employ-
ees covered by this Agreement, including any
relevant information that may be required in
6 Nos. 19-1051 and 18-3703
connection with the administration of the fringe
benefit fund, for their examination, whenever
such examination is deemed necessary by the
Trustees.
CBA Section 14.05.
Even if the Trust Agreements were not referenced through-
out the CBA, the CBA further states that:
The Employer’s obligation, under this Agree-
ment, to make payments and contributions to
fringe benefit funds for all employees covered
by this Agreement, applies to all employees
regardless of membership or non-membership
in the Union.
CBA Section 14.02.
The CBA’s language did not limit the trustees’ authority to
audit the payroll records under the contract terms. Rather, the
CBA intended to include “all employees regardless of member-
ship or non-membership in the Union.” Therefore, we disagree
with a narrow reading of “contributions to the funds for
employees ‘covered under this agreement’” as limiting the
Funds’ ability to audit all employees.
In light of the fiduciary duties imposed by ERISA on union
trustees and the authority provided by the Trust Agreements,
the Funds had the right to conduct random audits on employer
payroll records. “A benefit plan must primarily rely on union
monitoring of an employer’s compliance with its trust obliga-
tions.” Central States, 472 U.S. at 577 (citing Schneider Moving &
Storage Co. v. Robbins, 466 U.S. 364 (1984)). Here, Veterans,
Nos. 19-1051 and 18-3703 7
through its membership in the multiemployer association,
became signatory to the CBA and bound to its terms. The CBA
incorporates by reference these Trust Agreements throughout.
The Trust Agreements authorized the trustees to conduct
random audits to ensure the employer made the proper
payments. Therefore, the requested audit was within the
authority of the trustees.
We find the Funds may pursue an award of attorney’s fees
under the CBA § 14.06 or other sources of law. However, we
reject Veterans’ cross-appeal seeking its own attorney’s fees.
CONCLUSION
For the foregoing reasons, we REVERSE the district court’s
grant of summary judgment and REMAND for further ruling
by the district court consistent with the views expressed
herein.