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CENTRAL STATES v. KABBES TRUCKING COMPANY

November 17, 2004.

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, and HOWARD McDOUGALL, Trustee, Plaintiffs,
v.
KABBES TRUCKING COMPANY, an Illinois Partnership, and EFFINGHAM ASPHALT COMPANY d/b/a KABBES TRUCKING COMPANY, Defendants.



The opinion of the court was delivered by: CHARLES NORGLE, District Judge

OPINION AND ORDER

I. INTRODUCTION

Plaintiff Central States, Southeast and Southwest Pension Fund ("Fund") is an employee benefit plan and trust. The Fund and its Trustee bring this action pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), alleging that Defendants owe contributions to the Fund for the period from October 1990 to January 2002. Counsel submitted, and the court reviewed, pretrial proposed findings of fact and conclusions of law. The court then conducted a bench trial on June 18, 2003. The court heard evidence from both parties, and entered an Order asking the parties to submit post trial findings of fact and conclusions of law. Based on the totality of the evidence, the court adopts the findings of fact and conclusions of law proffered by the Plaintiffs, which are recited as follows. II. FINDINGS OF FACT AND CONCLUSIONS OF LAW

  A. Facts Relating To Parties And Relationships.

  1. The Pension Fund is an employee benefit plan and trust funded by contributions remitted by multiple participating employers pursuant to negotiated collective bargaining agreements with local unions affiliated with the International Brotherhood of Teamsters ("IBT") on behalf of employees of those same employers. All principal and income from such contributions and investments thereof is held and used for the exclusive purpose of providing pension benefits to participants and beneficiaries of the Pension Fund and paying the administrative expenses of the Pension Fund (Trial Transcript at pp. 11-12 and Art. I, Sec. 1, Art. II, Sec. 1, Art. III, Sec. 1 and Art. IV, Sec. 16 of Plaintiffs' Ex. 4).*fn1

  2. Operation of the Pension Fund is governed by the Pension Fund Trust Agreement ("Trust Agreement") (R 8; PX 4). The Pension Fund is managed by a Board of Trustees consisting of an equal number of employer and union selected representatives (Art. II, Sec. 2 of PX 4).

  3. The Trustees of the Pension Fund have adopted a defined benefit plan (R 262; §§ 4.01 to 4.09 of PX 5). The Pension Plan establishes approximately 40 schedules of benefits, called benefit classes, which differ in amount of retirement benefits provided, amount of associated contribution rate and on the availability of certain deferral privileges (R 262; § 3.01(d)(1) and (2) of PX 5). For each benefit class, the Trustees have published specified contribution rates which are negotiated by the local unions and employers (such as the Defendants and Local 26) (R 262; § 3.01(c) and (d)(1) and (2) of PX 5). The contribution rates associated with each benefit class do not change over time (R 265; § 3.01(c) of PX 5). To acquire higher benefits from the Pension Fund, the collective bargaining parties must negotiate a higher contribution rate that is associated with a higher benefit class (R 265; § 3.01(c) of PX 5).

  4. Local Union 26 ("Local 26") of the IBT is a labor organization which, at all relevant times, represented, for the purposes of collective bargaining, certain employees of Kabbes and Effingham (R 34, 120).

  5. Kabbes is an Illinois partnership (R 114). All of the partners in the Kabbes Trucking partnership are members of the Kabbes family (R 114).

  6. Effingham is an Illinois corporation (R 115). The current shareholders of Effingham are the Richard J. Kabbes Family Limited Partnership, the John R. Kabbes Family Limited Partnership and the Hoene Family Limited Partnership (R 114-115). The partners of the Hoene Family Limited Partnership are Robert J. Hoene and Mary K. Hoene (R 115). The partners of the Richard J. Kabbes Family Limited Partnership are Richard J. Kabbes and Carolyn Kabbes (R 115). The partners of the John R. Kabbes Family Limited Partnership are John R. Kabbes, Jane C. Kabbes, Douglas J. Kabbes, Gregg A. Kabbes, Brad W. Kabbes, and Todd A. Kabbes (R 115).

  7. The officers of Effingham are John Kabbes, Richard Kabbes, Mary Hoene and Robert Hoene (R 115-116).

  8. Mary Hoene is the sister of John and Richard Kabbes (R 115).

  B. Facts Relating To The Labor Agreements.

  9. Kabbes signed a collective bargaining agreement with Local 26 covering the period from July 1, 1980 to June 30, 1983 (the "1980 Agreement") (PX 1). 10. Article I, Section 2 of the 1980 Agreement indicates that covered employees are "truck drivers and all yard help." (PX 1).

  11. Article XVIII of the 1980-1983 Agreement requires Kabbes and Effingham to pay to the Pension Fund contributions on behalf of each covered employee who works two (2) days or parts of two (2) days during the week (PX 1).

  12. Under Article XVII of the 1980 Agreement, Kabbes also agreed to pay contributions to the Illinois Conference of Teamsters Welfare Fund on behalf of covered employees (PX 1).

  13. Article XIX of the 1980 Agreement provides as follows with respect to the duration of the 1980 Agreement:
ARTICLE NO. XIX — TERMINATION OF AGREEMENT
This Agreement shall be in full force and effect from July 1, 1980 to and including June 30, 1983 and shall continue in full force and effect from year to year thereafter unless written notice of desire to cancel or terminate the Agreement is served by either party upon the other at least sixty (60) days prior to annual date of expiration.
It is further provided that where no such cancellation or termination notice is served and the parties desire to continue said Agreement but also desire to negotiate changes or revision in this Agreement, either party may serve upon the other a notice, at least sixty (60) days prior to June 30th, of any contract year, advising that such party desires to continue this Agreement but also desires to revise or change terms or conditions of such Agreement.
(PX 1). A clause in a labor agreement such as Article XIX of the 1980 Agreement that indicates that the contract will continue in effect from year to year after a specified earliest possible expiration date absent a written notice of termination is known as an "Evergreen Clause." (R 206).

  14. John Kabbes, on behalf of Kabbes, signed an agreement extending the 1980 Agreement (the "1983 Extension Agreement"). The 1983 Extension Agreement contains an Evergreen Clause which indicated that it would remain "in full force and effect from July 1, 1980 through April 30, 1989 and each year thereafter unless written notice of termination or desired modification is given at least sixty (60) days but no more than ninety (90) days prior to the expiration date by either of the parties hereto." (the "1983 Extension Agreement") (PX 2).

  15. John Kabbes, on behalf of Kabbes, signed an agreement extending the 1980 Agreement from May 1, 1989 to April 30, 1992 (the "1989 Extension Agreement") (PX3). The 1989 Extension Agreement did not contain an Evergreen Clause. Instead, it provided as follows with respect to duration:
TERMINATION OF THIS MODIFIED EXTENSION
This Agreement shall be effective May 1, 1989 and remain in effect and full force through April 30, 1992. It is agreed that throughout the month of April 1992 this Agreement shall be open for changes and modifications if negotiations are on going but not settled by April 30, 1992, a thirty day extension shall be in effect if agreed to in writing by both parties.
(PX 3).
  16. The 1983 Extension Agreement and the 1989 Extension Agreement are undated. The evidence establishes that these documents were signed contemporaneously in early 1992. This is established by the following:
a. In a telephone conversation on September 3, 1987, Local 26 advised the Pension Fund that the parties had agreed to extend the 1980 Agreement (DX GG). In a telephone conversation on September 10, 1987, Local 26 indicated that it was still trying to get a renewal agreement (DX GG). These conversations establish that the 1983 Extension was not signed as of September 1987.
b. In a telephone conversation on or about September 8, 1988, Local 26 advised the Pension Fund that it was still trying to get a contract renewal and Kabbes was working under expired contract (DX B). This establishes that as of September 6, 1988, neither the 1983 Extension or the 1989 Extension were signed.
c. As of August 12, 1991, the Pension Fund's computer record indicated that Kabbes' contract expired on June 30, 1983 (p. 2 of DX D). If the Pension Fund had the 1983 Extension Agreement and/or the 1989 Extension Agreement as of that date, the computer record would have reflected an expiration date of April 3, 1989 or April 30, 1992 (R 212-13).
d. A log of a telephone conversation between the Pension Fund and Local 26 dated August 23, 1991 indicates that the Pension Fund was calling because it "need[ed] CBAs since 1983" (p. 3 of DX D). The log indicates that Local 26 advised the Pension Fund that neither Kabbes nor Effingham had signed a contract since 1983 and the employees would not go on strike so as far as Local 26 was concerned, the Pension Fund "should and can terminate them." (p. 3 of DX D). Based upon this conversation, the Pension Fund employee suggested to her supervisor that it may be advisable to ask the Trustees to consider terminating Kabbes and Effingham's participation (p. 1 of DX D). This establishes that as of August 23, 1991, the 1983 Extension Agreement and the 1989 Extension Agreement had not been signed.
e. One of the Pension Fund's managers (Thomas Baxa) testified that the Pension Fund initially received both the 1983 Extension Agreement and the 1989 Extension Agreement on April 30, 1992 (R 222-26). This testimony is supported by the "April 30, 1992 [Date] Received" stamped on both the 1983 Extension Agreement and the 1992 Extension Agreement by the Pension Fund's Pension Department (PX 42b and 42c). The Contract Update Checklist that the Pension Fund's Contracts Department prepares upon receipt of a contract was not completed until May 1992 and indicates that the Contracts Department received the 1982 Extension Agreement and the 1989 Extension Agreement on May 8, 1992 (DX I and R 222-24).
f. The 1989 Extension Agreement increased the pension contribution rate to be paid by Kabbes effective May 1, 1989 (PX 42(c)). After processing the 1989 Extension Agreement, the Pension Fund retroactively billed Kabbes and Effingham $5,000 in May 1992 to account for the increased pension rate in April 1992 (R 227-229). Kabbes and Effingham paid the retroactive billing in June 1992 (R 227, 228).
  17. Effingham was also a signatory to a collective bargaining agreement with Local 26 that required it to contribute to the Pension Fund on behalf of its truck drivers (R 121, 155; p. 3 of DX D).

  18. The parties have stipulated neither the Pension Fund nor Effingham can locate copies of the agreements signed by Effingham (R 148).

  19. Effingham signed the same 1983 Extension Agreement and the 1989 Extension Agreement that were signed by Kabbes (R 122-23). This is established by Effingham's conduct since 1992. The employees of both Kabbes and Effingham are reported to the Pension Fund on the same reporting forms that identify Kabbes as the employer (R 129-30; PX 7-18, 35-38). Several Effingham employees were reported to the Pension Fund on these reports for the period covered by the rebill that resulted from the higher contribution rates set forth in the 1989 Extension Agreement (R 129-30; PX 7-9, 37) so these employees were necessarily included in the rebill. The fact that Effingham paid the rebill on its employees at the same time as Kabbes and contributed to the Pension Fund after April 1992 at the higher rate required by the 1989 Contract Extension, establishes that Effingham signed the 1983 Extension Agreement and the 1989 Extension Agreement.

  20. By letter dated April 15, 1986, Local Union 26 advised Kabbes that it "desire[d] to negotiate certain changes and modifications in our now existing collective bargaining . . . [that] expires on June 30, 1986." [DX HH).

  21. However, no collective bargaining agreement between Local Union 26 and Kabbes had an expiration date of June 30, 1986 (PX 1 & 2).

  22. The April 15, 1986 letter indicated that Local 26 wanted to negotiate "changes or modifications", it did not indicate that Local 26 desired to cancel or terminate any agreement (DX HH). No evidence was presented that a written notice to terminate or cancel the 1980 Agreement was provided at trial.

  23. As indicated above, the 1983 Extension Agreement was not signed until 1992 (¶ 16, infra), therefore, the April 15, 1986 letter could not have terminated the 1983 Extension Agreement.

  24. No evidence of a written notice of a desire to terminate or modify the 1983 Extension was been presented at trial.

  25. No evidence that Effingham provided a written notice of its desire to cancel or terminate its 1980 Agreement or the 1983 Extension Agreement has been presented.

  26. After April 30, 1992, there were no collective bargaining negotiations between Local 26 and Effingham or Kabbes (R 151).

  27. The audit that triggered this case was initiated by a request from Pat Gleason of Local 26 in 2000 (R 61; DX J & K). Gleason advised the Pension Fund that Kabbes and Effingham had at least 5 unreported eligible employees (DX J & K). Gleason advised the Pension Fund that the labor agreement "expired in 1992," however, he advised the Pension Fund that Local 26 believed that the contract had continued in effect under the Evergreen Clause (DX M). Gleason also advised the Pension Fund that he believed contributions were owed to the Pension Fund on all employees regardless of union membership (DX M). Gleason must have believed that the Defendants were still contractually obligated to contribute to the Pension Fund or there would have been no reason for him to request an audit.

  28. On July 28, 2000, Bill Bounds of Local 26 also advised the Pension Fund's auditors that the Defendants' employees had refused to strike so the Defendants no longer had a contract with Local 26. As a result, he had issued union "withdrawal cards" to the 6 union employees "covered by the contract" (DX V). However, Bounds did not indicate when this alleged action occurred.

  C. Facts Relating To Contribution Payments.

  29. The Pension Fund relies upon participating employers to self-report the work history of their eligible employees. Based upon the reports submitted by the employers, the Pension Fund sends a monthly contribution bill. The Pension Fund has created reporting forms for participating employers to use to report changes in the covered workforce (e.g., layoffs, new hires, sick leaves, etc.) which are known as "Billing Change and Corrections Forms" or "Employee Billing Change and Corrections Forms" (hereinafter collectively referred to as "EBCC Forms"). Sometime after 1999, another reporting form known as a Turnaround Document ("TAD Form") was used. It is only necessary for an employer to submit an EBCC Form or a TAD Form for a month where there has been a change in the covered workforce; if an EBCC Form or a TAD Form has not been submitted, the Pension Fund assumes that there has been no change in the covered workforce and bills the same amount for each week that was billed for each week of the prior month (R 10-20).

  30. Kabbes and Effingham submitted EBCC Forms to the Pension Fund prior to April 30, 1992, which as noted above (see ¶ 19, infra.), identified only Kabbes as the employer (R 129-30; PX 7-9, 35-38). Although Kabbes and Effingham now claim that their contractual obligation to contribute to the Pension Fund ended on April 30, 1992, they submitted EBCC Forms and TAD Forms reporting the work history of certain eligible employees for the period of May 1992 through April 2003 (R 133; PX 9-19, 35-38).

  31. Kabbes and Effingham completed EBCC Forms by entering the names of their employees, the employees' social security numbers, and the employees' current status (e.g., laid off, on sick leave, rehired, etc.). On the TAD Forms, the employees on whose behalf the Pension Fund was billing were listed and Kabbes and Effingham noted any changes or additions on the TAD Form (R 10-20, 133; PX 7-19).

  32. The EBCC Forms, the TAD Forms as well as the monthly bills submitted to employers by the Pension Fund contain a Certification Clause which states:
The employer hereby reaffirms his obligation to make contributions required by the Collective Bargaining Agreement and further represents that all employees eligible to participate in the Fund, in accordance with the rules of the Fund and the `Employee Retirement Income Security Act of 1974' are being reported and only those eligible employees are being reported." (R 10-20; PX 7-19).
  33. The EBCC Forms submitted by Kabbes and Effingham from 1990 through March 2003 were regularly, but not always, signed by John or Richard Kabbes directly below the Certification Clause (PX 7-15). The TAD Forms submitted after 1999 were signed by Jane Sudkamp or Richard Goldstein (PX 16-17; R 134-136). Goldstein was delegated the responsibility for preparing the EBCC Forms and the TAD Forms that were submitted to the Pension Fund until his death in 2001 (R 119, 146-7). After Goldstein's death, Jane Sudkamp was delegated the responsibility for submitting the TAD Forms to the Pension Fund (R 118).

  34. The purpose of requiring employers to reaffirm their obligation to contribute under the Certification Clause is to insure that the employer is contractually obligated to continue making contributions to the Pension Fund (R 17, 19, 221, 252).

  35. After April 30, 1992, Kabbes and Effingham did not alter either the manner in which they had previously submitted EBCC Forms (and TAD Forms after 1999) or the manner in which they remitted contributions (R 136).

  36. After April 30, 1992, Rich Goldstein was delegated the duty to communicate with the Pension Fund on behalf of Kabbes and Effingham (R 118-119).

  37. Kabbes and Effingham continue, to the present day, to report work history and pay contributions to the Pension Fund for some of their truck drivers (R 80, 129, 130; PX 18-19).

  38. During the period after April 1992 until some time in 2000, Kabbes and Effingham also remitted contributions to the Illinois Conference of Teamsters Welfare Fund on behalf of the same employees who were listed on the reporting forms that were submitted to the Pension Fund (R 127).

  39. The Pension Fund provides pension credit to employees based upon the work history reported by participating employers. The Pension Fund has awarded credit to the employees of Kabbes and Effingham based upon the work history reported for the period of April 1992 through the present (R 262, 266; PX 37, 38; pp. 430-37 of DX F).

  40. The benefit entitlement of David Althoff and David Carroll will be significantly reduced if the credit they earned after April 1992 based upon the work history reported by Effingham on their behalf is eliminated. Neither of these individuals have retired. The impact on their benefit would be as follows:
BENEFIT AS OF 5/31/03, BENEFIT AS OF 5/31/03 INCLUDING POST 4/30/92 EXCLUDING POST 4/30/92 NAME AGE CREDIT CREDIT
D. Althoff 50 19.20 years 8.775 years $312.14 at age 65 $98.54 at age 65
 
D. Carroll 58 24.525 years 14.125 years $400.00 at age 60 $148.90 at age 65
(R 267, 269; PX 37).
  41. The benefit entitlement of Kenneth Hollscher and Leroy Wente will be significantly reduced if they lose the credit they earned after April 1992 based upon the work history reported by Kabbes on their behalf. Neither of these individuals have retired. The impact on their benefit would be as follows:
 
BENEFIT AS OF 5/31/03, BENEFIT AS OF 5/31/03 INCLUDING POST 4/30/92 EXCLUDING POST 4/30/92 NAME AGE CREDIT CREDIT
K. Hoelscher 63 33.050 years 14.400 years $434.59 at current age $167.46 at age 65 L. Wente 69 29.111 years 18.661 years $400 at current age $149 at current age
  (R 269; PX 38).

  42. William Pals was an employee of Kabbes from 1968 to 1999 (pp. 430-38 of DX F).

  43. Pals applied for retirement benefits in March, 1999 (pp 438-42 of DX F).

  44. At that time, he represented that he was a member of Teamsters Local 26 (p. 438 of DX F).

  45. William Pals retired on May 12, 1999 and began receiving a monthly pension benefit for life of $421.07 (R 269; PX 38).

  46. Without credit earned based upon his employment by Kabbes from April 1992 to May 12, 1999, Pals' monthly benefit would be $400.00 and he would owe the Pension Fund the difference between the $421.07 he has received since May 1999 and the $400 he would be entitled to receive (50 months x $21.07 = $1,053.50) (R 269; PX 38). This prospective benefit reduction and liability for the overpayment would probably impose a significant hardship on a 69 year old individual who is receiving a relatively small monthly pension.

  D. Facts Relating To the Pension Fund's Audit.

  47. The Trust Agreement permits the Pension Fund to audit the records of participating employers (R 8; Art. III, § 5 of PX 4; DX KK).

  48. Central States' Special Bulletin 85-6 issued to participating employers and local unions on August 1, 1985 (which would include Kabbes and Effingham), informed participating employers and unions that audits conducted by the Pension Fund would conform to Article III, Section 5 of the trust agreements, as interpreted by the Supreme Court (DX KK). 49. Special Bulletin 85-6 does not require non-participating employers to permit an audit of their records (DX KK).

  50. On or about May 23, 2000, the Pension Fund sent a letter to Kabbes which notified Kabbes that the Pension Fund intended to perform an audit of its records to verify that all required contributions had been paid for the period from December 29, 1996 to December 25, 1999 (R 34, 35; PX 20).

  51. The May 23, 2000 letter notified Kabbes that the Pension Fund was entitled to the audit pursuant to the Pension Fund Trust Agreement, Article III, Section 5 and that the purpose of the audit review was to identify all eligible plan participants and verify that contributions were properly reported for all eligible plan participants (R 36; PX 20).

  52. To conduct the audit, payroll ledgers, individual earning cards, IRS forms, seniority lists, personnel files, time cards and daily driver logs are reviewed (R 36).

  53. Rich Goldstein was delegated the authority to represent Kabbes and Effingham in relation to the audit, including ...


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