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United States District Court, N.D. Illinois

January 22, 2004.

Hope Cartage, Inc

The opinion of the court was delivered by: JAMES ZAGEL, District Judge

The Trustees of the Suburban Teamsters of Northern Illinois Welfare and Pension Funds ("Funds") filed a 29 U.S.C. ยง 1145 (ERISA) collection action to recover fringe benefit contributions due from Hope Cartage, Inc., a corporation with an alleged single employee. On August 27, 2003, the Funds sent Hope a Request to Produce for an Audit, Requests to Produce and Interrogatories. On September 30, 2003, Hope served its Answer to the aforementioned requests. In its Answer to Interrogatory #12, Hope disclosed that it hires independent subcontractors to perform bargaining unit work. On October 28, 2003, the Funds prepared a Federal Rule of Civil Procedure 37(a) demand letter to Hope seeking documents necessary to conduct an audit of the corporation's employee(s) and independent contractors for the period from January 1, 1993 to the present, a litany of other documents, and answers to several interrogatories.

Hope refuses to produce any documents necessary to conduct the audit on the ground that it is entitled to subcontract and employ independent contractors due to a provision in the governing collective bargaining agreement ("CBA"). Under this provision, "[t]he Employer may subcontract overflow work when all of its regular employees are fully employed. Overflow work may be performed by persons other than the Employer's employees, provided that such subcontracting is not used as a subterfuge to evade the provisions of this agreement." The Funds argue that without an audit, they cannot ascertain the quantity of bargaining work Hope subcontracted, and whether the subcontracted work was "overflow work" or "was used as a subterfuge to evade the provisions of [the] Agreements[s]." Along with refusing to produce documents for the audit, Hope has failed to respond to any of the other discovery requests in the October 28, 2003 letter.

Federal Rule of Civil Procedure 26(b) provides that "[p]arties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party," and that "[f]or good cause, the court may order discovery of any matter relevant to the subject matter involved in the action." The rale also permits discovery of information, which although not admissible at trial, appears reasonably calculated to lead to the discovery of admissible evidence. The rule thus permits a broad range of discovery and vests the court with "wide discretion in determining the scope and effect of discovery." Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1050 (11th Cir. 1985). In exercising this discretion, a broad scope is required to allow the parties equal access to the operative facts. Onwuka v. Federal Express Corp., 178 F.R.D. 508, 516 (D. Minn. 1997).

  Audits of an employer's payroll records to establish the amount of the contribution obligation generally have two bases: (1) a provision in the trust agreement or CBA requiring production of the records on request by the trust; or (2) under court rules in a pending lawsuit whereby the trusts may require production of the records in pretrial discovery. The validity of such audits was upheld in Central States, Southeast and South west Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559 (1985). Here, the Funds' right to audit is established by the CBA and also by Trust Agreements which are incorporated by reference therein. Hope's only reasonable objection to the requested Audit is that it is beyond the scope of the Funds' Complaint because their sole claim is for contributions owed on behalf of the Hope's owner, John Sinise, and because they did not specifically request an audit in their Complaint. However, the Funds have now amended their Complaint to remedy these deficiencies and thus moot these objections. Accordingly, the request to produce for the audit is appropriate.

  As for the remaining discovery requests, I find that they are all relevant or reasonably calculated to lead the discovery of admissible evidence. Accordingly, I order Hope to respond to them, to the extent it has not yet done so.

  For the reasons above, the Funds' Motion to Compel Discovery Production and Audit is GRANTED.


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