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August 19, 1982


The opinion of the court was delivered by: Perry, Senior District Judge.


This cause came on for trial without a jury. The court has now heard all of the evidence, has viewed and read all of the exhibits admitted as evidence, heard all of the arguments by the attorneys for the plaintiffs, and is now fully advised in the premises herein. The court hereby makes its findings of fact and its conclusions of law as set forth hereunder.


1. The Plaintiffs are the Trustees of various multi-employer fringe benefit funds established pursuant to collective bargaining agreements for the purpose of providing pension, health and welfare, apprenticeship, and vacation benefits for employee-beneficiaries who are employed as heavy equipment operators. The Plaintiff Trustees administer their respective trusts in accordance with the provisions of the respective Agreements and Declarations of Trust, and in accordance with the provisions of the Labor-Management Relations Act of 1947, as amended, 29 U.S.C. § 186, and the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq.

2. Under the terms of the Agreements and Declarations of Trust, the Trustees are required to receive contributions from contractually obligated employers, and to hold and manage those contributions for the exclusive purpose of providing benefits to the employee-beneficiaries, pursuant to law and the applicable written Agreements.

3. The Defendant, KELDORN, INC., is an employer in an industry affecting commerce, which employs and has employed certain individuals in an appropriate unit of heavy equipment operators, a majority of whom are members of and represented by Local 150 of the International Union of Operating Engineers, AFL-CIO. The Defendant does business within the geographical jurisdiction of the Court.

5. Defendant, KELDORN, INC., is the successor to Kel-Dorn Excavators, and has succeeded to the obligations of Kel-Dorn Excavators set forth in the preceding paragraph. The Defendant has admitted that the Memorandum of Agreement establishes its obligations to the Plaintiffs pursuant to the terms of the Trust Agreements, the collective bargaining agreements, and in particular, the Heavy and Highway and Underground collective bargaining agreements in effect between 1973 and 1978.

6. Among the Defendant's obligations to the Plaintiffs is the obligation that the Defendant submit to the Plaintiffs every month a written report setting forth the actual number of hours in that month which each of its bargaining unit employees worked and were paid. The Defendant is further required to submit monetary fringe benefit contributions to the Plaintiffs at rates specified in the collective bargaining agreements for each hour which its bargaining unit employees worked and were paid. Nothing in the Trust Agreements or collective bargaining agreements permits the Defendant to report or pay contributions based upon anything other than the actual hours worked by and paid to its employees.

7. On the basis of contributions received from employers, the Plaintiffs grant fringe benefit eligibility to eligible employees based upon the terms of the respective Plans.

8. Because of the fact that eligibility for fringe benefits depends upon actual hours worked and paid, the Trust Agreements provide that the Plaintiffs are entitled to audit the records of participating employers to determine whether or not they have accurately reported the actual hours worked by and paid to their employees. The Trust Agreements further provide that in the event an audit reveals an employer to have underreported and underpaid contributions to the Funds, the Trustees are entitled to recover from said employer all costs of auditing the employer's records, liquidated damages in the amount of 10 percent of all delinquent contributions, and the Trustees' reasonable attorneys' fees.

9. In 1977, the Plaintiffs requested that the Defendant permit an audit of its records. The Defendant refused, and Plaintiffs brought this action.

10. During the pendency of this litigation and on the basis of certain discovery requests filed by the Plaintiffs, Plaintiffs obtained access to the Defendant's records and an audit was performed on December 12, 1978, by the certified public accounting firm of Schultz & Chez.

11. The audit revealed that between 1975 and 1977, the Defendant had seven employees who were or may have been operating engineers. These employees were Fred Doorn, Ed Doorn, Jack DeVries, D. Drinnan, Ed Peters, Gary Hofstra and John Mark. Ed Doorn and Fred Doorn were indicated as being officers in the defendant corporation. Five of the seven employees had previously been reported to the Plaintiffs as being operating engineers. The remaining two, Hofstra and Mark, had never been reported to the Plaintiffs, but based upon the rate of pay which they were receiving, and the absence of additional information as to their duties, the auditor provided a list of their hours, subject to review by the Fund Administrator. As a consequence, the completed audit report detailed the number of hours for each month during the audited period which each employee worked for the Defendant and was paid.

12. The audit report further compared the actual hours worked and paid by the Defendant's employees to the hours which the Defendant had reported to the Plaintiffs. A clear pattern emerged which showed that the Defendant had not only failed to report actual hours worked by and paid to its employees, but had been reporting hours on a purely arbitrary basis. From January, 1975 through April, 1976, the Defendant reported an arbitrary number of hours for each employee. That identical arbitrary number was reported on behalf of each and every one of the employees reported in that particular month. The audit reveals that in every case, this arbitrary number, supposedly representing hours worked and paid, was inaccurate. From May, 1976 through December, 1977, the Defendant changed its procedure and simply reported on the basis of a straight 40 hours a ...

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