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March 21, 2003


The opinion of the court was delivered by: John W. Darrah, Judge, United States District Court



Plaintiffs, the Structural Iron Workers Local Union No. I Pension Trust Fund and the Structural Iron Workers Local Union No. 1 Annuity Fund, which are employee benefit plans within the meaning of the Employee Retirement Security Act of 1974 ("ERISA'), 29 U.S.C. § 1002 (1), (2); and George Weiland, a Trustee of the Funds (collectively "Plaintiffs"), filed a single-count amended complaint against Defendants, Linear Construction Ltd. and JJM Construction, Inc. (collectively "Defendants"), to collect unpaid contributions, interest, liquidated damages, and audit fees owing to the Funds from December 3, 1999 to the present pursuant to an agreement executed between the parties, Linear Construction Ltd. ("Linear") raised the defense of fraud in the execution. Defendants also claim that JJM Construction, Inc, ("JJM") performed some of the work alleged to be the basis of Plaintiffs' claim and that JJM is a separate corporate entity not bound by the agreement and that, therefore, JJM is not obligated for payment to Plaintiffs. Plaintiffs claim that. JJM is the "alter ego" of Linear and that the work is subject to the agreement. Defendants also claim that some of the work that Plaintiffs allege as the basis of the unpaid contributions was not "covered work" under the collective bargaining agreement.

There was a trial by the Court without a jury on the issues; testimony from several witnesses was heard over two days.

For the reasons discussed below, judgment is entered in favor of the Plaintiffs and against the Defendants.

Pursuant to Federal Rule of Civil Procedure 52, the Court hereby enters the following written Findings of Fact and Conclusions of Law which are based upon consideration of all the admissible evidence as well as this Court's own assessment of the credibility of the trial witnesses. To the extent, if any, that Findings of Fact, as stated, may be considered Conclusions of Law, they shall be deemed Conclusions of Law. Similarly, to the extent that matters expressed as Conclusions of Law may be considered Findings of Fact, they shall also be deemed Findings of Fact.


The Structural Iron Workers Local Union No. 1 ("Local 1") has entered into successive collective bargaining agreements ("CBA/Principal Agreement") with the Associated Steel Erectors of Chicago, Illinois ("the Association"), an association of employers engaged in the structural iron working industry. At all relevant times, Local 1 has been the sole and exclusive bargaining representative of iron worker employees employed by contractors that are members of the Association and also contractors that execute written compliance agreements, agreeing to be bound to the CBA.

The Local Structural Iron Workers Local Union No. 1 Fund Disbursement Office ("IWFDO") is established by the CBA/Principal Agreement and is a third-party thereto. Steve Bukovac ("Bukovac") is the administrator of the IWFDO. As the IWFDO administrator, Bukovac is duly authorized to collect employer contributions owed to the IWFDO Funds. Bukovac is also authorized on behalf of Local 1 to collect amounts which have been, or are required to be, withheld from the wages of employees for transmittal to Local 1 in payment of its Working Assessment and to the Political Action League. One of his duties as administrator is to collect contributions from signatory employers and ensure that the contributions are allocated into the correct accounts. He also initiates audits of employers to ascertain compliance with their contribution obligations under the CBA/Principal Agreement.

George Weiland ("Weiland") is a Trustee of the Structural Iron Workers Local Union No. 1 Pension Trust Fund ("the Pension Fund") and the Structural Iron Workers Local Union No. 1 Annuity Fund ("the Annuity Fund"). As Trustee of the Pension and Annuity Funds, Weiland is duly authorized to collect employer contributions owed to: the Structural Iron Workers Local Union No. 1 Welfare Fund; the Structural Iron Workers Local Union No. 1 Pension Trust Fund; the Apprentice & Journeyman's Retraining Fund; the MidAmerica Pension Fund; the Associated Steel Erectors Industry Promotion Fund; the NIA Training & Journeymen Upgrading Fund; the Institute of the Ironworking Industry; Local No. 1 Building Fund; Chicagoland Construction Safety Council; the Structural Iron Worker Local Union No. 1 Annuity Fund; and the Scholarship Fund ("the IWFDO Funds").

Linear and JJM are engaged in, among other things, the erection and installation of preengineered steel buildings.

Fraud in the Execution

Linear and JJM have been employers engaged in commerce within the meaning of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, and ERISA. Linear operates out of the home of David Moravec ("Moravee") at 3703 Rose Anne Court, Wonder Lake, Illinois.

Moravec is Linear's sole sharebolder and serves as an officer of the corporation. Moravec's formal education is limited to completing high school. Moravec has been a construction worker for fourteen years and has operated at least two construction companies during this period of time. Prior to his operation of Linear, Moravec was a partner in three other construction businesses for which he was responsible for bidding on and negotiating contracts in the pre-engineered self-storage building business. Linear and Moravec were not signatories of any type of agreement with a labor organization prior to December 1999.

Since its inception, Linear has performed the erection of pre-engineered self-storage buildings and the installation of the lockers in the buildings, Self-storage buildings are built in a patented way and are only fabricated by steel companies that make steel specifically for these buildings.

Linear was contracted by its construction broker, SS-20, to provide the labor to erect a self-storage building at 2525 West Armitage ("the Armitage Project"), beginning in November 1999 and continuing through February 18, 2000. In late November 1999, Linear was ordered by the general contractor, G.A. Johnson, to stop work on the Armitage Project because Local 1 had threatened to picket the site. Shortly prior to December 3, 1999, a meeting was held at the Armitage Project job site with Moravec; Brian Kingsbury ("Kingsbury"), a Local 1 union organizer; and Rich Bartuce, GA. Johnson's representative. During that meeting, Bartuce stated that GA. Johnson needed to resolve the union labor issue so that Linear could complete the Armitage Project.

During that meeting, Kingsbury proposed that he might agree to allow Linear to use a composite crew, whereby Union members work alongside employees of a nonsignatory employer, consisting of three of Liner's current employees and three Iron Workers from Local 1's hiring hall. Kingsbury also indicated that Linear's current employees could work under the Local 1 CBA/Principal Agreement by obtaining a permit from Local 1's union hall. Under the permit, Liner would have to pay the Local 1 wage scale as well as fringe benefits to the Funds for all of Linear's union and non-union employees. At the time of the Armitage Project, the hourly package for Local 1 Iron Workers, consisting of the wage rate and fringe benefits, was $42.21 per hour.

Moravec told Bartuce that he was concerned about Linear's budget due to the fact that it would be completing the job with the union wage scale and with employees with whom he had not worked. Bartuce asked Moravec to calculate how much more it would cost Linear to use union labor on the remainder of the Armitage Project. Moravec calculated the additional cost of the Armitage Project using the union wage scale provided to him by Kingsbury.

Moravec submitted the new bid with his calculation of the additional cost of providing union labor on the Armitage Project, amounting to $58,948, which was accepted by G.A. Johnson; and the sum was paid directly to Linear.

On December 3, 1999, Bartuce, Moravec, and Kingsbury met a second time at the Armitage Project job site, They agreed that Linear would finish the Armitage Project with the composite crew and would pay union wages and benefits to all employees on the project. Moravee felt that a serious concern of those at the meeting was the fact that no work had been performed on the Armitage Project, and there were difficulties in erecting a steel and block building in the winter.

At the second meeting, Kingsbury gave Moravee a copy of the CBA/Principal Agreement, the wage and welfare bond form, the Funds' monthly reporting forms for hours and contributions, and copies of the Local 1 Compliance Agreement ("Compliance Agreement"). Moravec signed his name as President of "Linear Construction II, Inc." ("Linear II") on two copies of the Compliance Agreement. Moravec used the name Linear II instead of Linear because he thought that he needed a different company on the Compliance Agreement in order to avoid binding Linear to the union agreements. Although the Compliance Agreement identifies Linear II as the signatory employer, Linear II was never formed or incorporated at that time and still does not exist. Furthermore, Linear's equipment and employees were used to complete the Armitage Project along with Local 1 Iron Workers.

Prior to his execution of the Compliance Agreements, Moravec expressed concerns regarding the legal consequences of entering into a CBA with Local 1. lie knew that an employer could not "work union and non-union" under a CBA. He had negotiated a $59,000 change order with the general contractor to cover the increased costs of union labor. He made no notation on the Compliance Agreement to indicate that the Compliance Agreement was limited to only the Armitage Project or that Linear agreed to the Compliance Agreement with a "project only" limitation, and there is no other written evidence of any agreement to limit the Compliance Agreement to the Armitage Project.

Moreover, on or about December 6, 1999, despite the absence of any provision in the Compliance Agreement requiring proof of insurance, Linear submitted to Local 1 a Certificate of Insurance, which identified Local 1 as the certificate holder, as evidence of Linear's compliance with the insurance requirements under Section 33 of the CBA/Principal Agreement. On January 12, 2000, Linear, through its insurer, submitted to the Local 1 office a copy of an executed Wage and Fringe Benefit Bond in the amount of $50,000 for coverage of five or more Iron Workers, as evidence of Linear's compliance with the bond requirement under Section 33 of the Principal Agreement, despite the absence of any provision in the Compliance Agreement requiring proof of a bond. The reporting forms submitted by Linear state that Linear "agrees to make all contributions as provided in the collective bargaining agreement between Associated Steel Erectors of Chicago and Bridge, Structural & Reinforcing Iron Workers, Local Union No. 1."

Moravec completed monthly reports himself for the months of December 1999 and January and February 2000 and submitted them on behalf of Linear to the Funds Disbursement Office in accordance with the Principal Agreement. Each of the monthly reports identified the number of hours worked by each employee on the Armitage Project and the amount of fringe benefits due for those hours. Moravec certified that Linear paid all of its Local 1 and non-union employees' gross wages based on the Local 1 journeymen wage scale for 1999-2000 ($27.85 per hour) and benefits of $14.36 per hour as mandated by the Principal Agreement. Prior to signing the Compliance Agreement, ...

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