The opinion of the court was delivered by: Jeanne E. Scott, U.S. District Judge
This matter comes before the Court on the Defendants' Motion to Dismiss Plaintiffs' Amended Complaint (d/e 14) (Motion). Plaintiffs (Funds) operate multiemployer employee benefit welfare plans qualified under the Employee Retirement Incomes Security Act of 1974 (ERISA). 29 U.S.C. § 1001 et seq. The Funds allege that the Defendants' employees are participants in the plans operated by the Funds and that the Defendants are obligated to submit to the Funds regular reports and contributions. The Funds allege that the Defendants have breached their obligations. The Defendants move to dismiss for failure to state a claim. For the reasons set forth below, the Motion is DENIED.
For purposes of the Motion, the Court must accept as true all well-pleaded factual allegations contained in the Amended Complaint and draw all inferences in the light most favorable to the Funds. Hager v. City of West Peoria, 84 F.3d 865, 868-69 (7th Cir. 1996); Covington Court, Ltd. v. Village of Oak Brook, 77 F.3d 177, 178 (7th Cir. 1996). The Court may also take judicial notice of matters of public record. Henson v. CSC Credit Services, 29 F.3d 280, 284 (7th Cir. 1994). When read in that light, the Amended Complaint must set forth a short and plain statement of the claim showing that the Funds are entitled to relief. Fed. R. Civ. P. 8(a); Bell Atlantic Corp. v. Twombly, __ U.S.__, 127 S.Ct. 1955, 1969 (2007); Airborne Beepers & Video, Inc. v. AT&T Mobility, LLC, 499 F.3d 663 (7th Cir. 2007).
The Funds allege that from March 25, 2005, to September 30, 2006 (Audit Period), Defendant J.L.H. Interior Construction, Inc. (JLH), had a Collective Bargaining Agreement (CBA) with the United Brotherhood of Carpenters and Joiners of America, AFL-CIO. Under the terms of the CBA, JLH's covered employees were participants in the ERISA qualified plans operated by the Funds. JLH was also obligated to comply with the terms of the Funds, including filing regular reports, submitting to audits, and making contributions to the Funds for each covered employee for each hour worked by that employee. During the Audit Period, JLH and Defendant Hicks Construction, Inc. (HCI) were two corporations that had an interrelation of operations, common management, centralized control over labor relations, common ownership and common employees. The Amended Complaint alleges that, by virtue of these connections and interrelationships, JLH and HCI were a single employer for purposes of ERISA.
The Funds conducted an audit of the books and records of the Defendants to determine compliance with their alleged obligations to the Funds. The result was an Audit Report. Amended Complaint, Exhibit C, Statement of Additional Reportable Hours Due for JLH Interior Const. -- Hicks Construction for the Period March 25, 2005 to September 30, 2006 (Audit Report).*fn1 The Audit Report stated, in part:
We were instructed by the Fund to perform a payroll compliance examination on JLH Interior Construction, a signatory Employer to the Fund. However, we were informed by JLH Interior Construction's accountant and by Mr. Michael Hicks, the President, that JLH Interior Construction had no payroll or employees for the period 2002, 2003, 2004, 2005, and 2006.
Further, we learned that Mr. Michael Hicks, owned and operated a non-union company, Hicks Construction, FEIN 37-1345166. We were allowed access to the payroll records for this Company. All hours and liability shown as due herein are hours worked by employees and subcontractors of Hicks Construction. Amended Complaint, Exhibit C, Audit Report, at 4, note 1. The audit revealed that all of the hours at issue were listed on the payroll records of HCI as work performed by HCI employees. JLH did not have payroll records.
The Funds' counsel corresponded with the Defendants before and after the audit. Amended Complaint, Exhibit D, Correspondence Between attorney Britt W. Sowle and Michael J. Hicks dated December 4, 2006, February 14, 2006, and March 7, 2007. The March 7, 2007, letter (Letter) from the Funds' counsel to Michael Hicks at JLH, stated, in part:
Previously, the Fund had requested various records related solely to JLH Interior Construction ("JLH") due to the fact that entity was signatory to a residential agreement with the Mid Central Illinois Regional Council of Carpenters. You had stated JLH "never got off the ground" and thus had no payroll records for the period since it became signatory. The auditor has since reviewed JLH bank statements and confirmed your statement.
In an effort to establish the type of work performed by your non-signatory company, Hicks Interiors, Inc., an audit was performed which revealed $116,995.86 due and owing in delinquent or unreported fringe benefit contributions.
You recently submitted challenges to the audit liability, yet failed to include any documentation to support your allegations. After reviewing the matter, I have the following questions which remain unanswered:
(1) JLH Interior Construction became signatory to the Mid-Central Illinois District Council of Carpenter's commercial work agreement in September of 1998. A separate residential agreement was signed by JLH Interior Construction in March 2005. Unless you properly cancelled the commercial work agreement according to the procedures outlined in the agreement, you were obligated to perform all commercial work through JLH Interior Construction. If no such cancellation has been made, all commercial work performed by the employees of Hicks Interiors, Inc. during the audit period would be due and owing. Please advise as to whether you cancelled the commercial work agreement and produce copies of any and all letters to the local union reflecting this cancellation.
(2) As discussed above, any and all residential work performed by the employees of Hicks Construction, Inc. should have been performed by JLH Interior Construction. This is due to the fact that JLH Construction signed a residential agreement in March 2005. As a result, all residential work performed by employees of Hicks ...