The opinion of the court was delivered by: CHARLES NORGLE, District Judge
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
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
(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
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
18. The parties have stipulated neither the Pension Fund nor
Effingham can locate copies of the agreements signed by Effingham
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
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
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
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;
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 ...