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. § 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
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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