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Trustees of the Chicago Plastering Institute Pension Trust v. Cork Plastering Co.

July 1, 2009

TRUSTEES OF THE CHICAGO PLASTERING INSTITUTE PENSION TRUST, ET AL., PLAINTIFFS-APPELLEES, CROSS-APPELLANTS,
v.
CORK PLASTERING COMPANY, F/K/A G AND J PLASTERING COMPANY, INC., DEFENDANT-APPELLANT, CROSS-APPELLEE.



Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 03 C 6867-Sidney I. Schenkier, Magistrate Judge.

The opinion of the court was delivered by: Rovner, Circuit Judge.

ARGUED DECEMBER 1, 2008

Before BAUER, ROVNER, and EVANS, Circuit Judges.

Beginning in 1984, G and J Plastering Company ("G&J") operated as a plastering contractor in Cook County, Illinois, and surrounding*fn1 unions, among them the Journeymen Plasterers' Protective and Benevolent Society of Chicago, Local 5 ("Local 5"), until a November 2002 election, when the employees selected a union other than Local 5 as their one and only bargaining representative. As a consequence of that election, G&J "exited" from the collective bargaining agreement with Local 5 and ceased making contributions to the various fringe benefit trust funds serving Local 5 members (the "Local 5 Funds"). When the Local 5 Funds conducted an exit audit of G&J's records to determine whether G&J had any outstanding liability to the Funds, they determined that G&J had not made the appropriate contributions to the Local 5 Funds for work performed within Local 5's jurisdiction. They filed suit against G&J pursuant to section 301 of the Labor Management Relations Act of 1947, 29 U.S.C. § 185, and section 502(a)(3) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(3). After a three-day trial, the district court found that G&J had not com-plied with its obligations to the Local 5 Funds and entered*fn2 counties. Its employees were represented by multiple judgment in the Funds' favor in the total amount of $1,109, 466.23. The court later awarded the plaintiffs costs totaling $9,784.67. The award of costs did not include the audit costs incurred by the Local 5 Funds, as the court deemed the request for those costs lacking in adequate detail. The parties have filed cross-appeals: G&J contends that the district court erred in allowing the plaintiffs to introduce certain testimony and other evidence in support of their claims, and the plaintiffs contend that the district court erred in denying their request for audit costs. We affirm.

I.

The period of time relevant to this case extends from October 1, 1993 through November 14, 2002. The audit conducted on behalf of the Local 5 Funds actually extended as far back as February 1992, but the Local 5 Funds ultimately decided not to seek relief for any work performed prior to October 1, 1993. Throughout the relevant nine-year period, G&J conducted construction plastering work in Cook, DuPage, and Lake Counties (among others) in Northern Illinois. At any given time, it had between twenty-five and thirty plasterers in its employ.

Prior to November 2002, the plastering employees of G&J were represented by three different unions: Locals 56 and 74 of the International Union of Bricklayers and Allied Craftsmen (the "DuPage Bricklayers"), Lake County Area Plasterers' Union Local 362/11 (the "Lake County Plasterers"), and Local 5. Each union had its own geo-graphic jurisdiction: the DuPage Bricklayers covered DuPage County, the Lake County Plasterers covered Lake County, and Local 5 covered Cook, Will, Kane, McHenry, DeKalb, Kendall, Grundy, LaSalle, and Livingston Counties. Each union had its own set of trust funds for the benefit of its members. G&J was bound to separate collective bargaining agreements with each of these unions.

Each of those agreements obligated G&J to make contributions to the various trust funds on behalf of its employees. There were six funds associated with Local 5, and along with Local 5 itself, each of those funds is a plaintiff in this suit: the Chicago Plastering Institute Pension Fund, the Chicago Plastering Institute Health and Welfare Fund, the Chicago Plastering Institute Retirement Savings Fund, the Local No. 5 Journeymen Plasterers' Protective & Benevolent Society of Chicago Apprentice & Training Fund, the Chicagoland Construction Safety Council (a Chicago-area council that promotes safe practices in the construction industry), and the Chicago Plastering Institute (a promotional trust fund that collects and forwards contributions to the Chicago-land Construction Safety Council). The first four of these funds are employee benefit funds within the scope of ERISA's section 3, 29 U.S.C. § 1002(3); the remaining two funds are non-ERISA funds.

By the terms of the collective bargaining agreements, G&J's obligation to make contributions to one union's funds versus those of another depended not on the union to which an employee belonged, but rather on the geographic territory in which the employee performed plastering work. So whenever a G&J employee performed plastering work within the territorial jurisdiction of Local 5, G&J was obligated to make contributions to the Local 5 Funds based on that work, regardless of whether the employee performing the work was a member of Local 5, the DuPage Bricklayers, or the Lake County Plasterers. Similarly, G&J was separately obliged to deduct working assessments (i.e., union dues) from payments made to Local 5 members for work they per-formed within Local 5's jurisdiction. Those assessments were payable to Local 5 itself rather than to the Local 5 Funds.

As it turns out, however, G&J's contractual obligation to make contributions based on the territory in which its employees performed plastering work was to a significant extent superseded or rendered moot by two external sets of agreements among the union locals and their funds.

First, as to two of the three unions that represented G&J's employees prior to the November 2002 election, G&J's contractual obligation to make fringe benefit contributions based on the territory in which work was performed was superseded by a separate directive to make all contributions to the union that represented a given employee-his "home local"-and to the fringe benefit funds affiliated with that union. Beginning in 1991, the Northern Illinois District Council of Operative Plasterers and Cement Masons' International Association (the "OP Council"), a collective of union locals representing plasterers and cement masons including Local 5 and the Lake County Plasterers, required contractors who employed members of those locals to pay both benefits and working assessments directly to a member's benefit office and local union, regardless of where the employee was performing his work. That rule is known colloquially as the "money-follows-the-man" rule. The rule did not apply to work performed by members of the DuPage Bricklayers, which was not a member of the OP Council. Thus, as to G&J's employees who were members of the DuPage Bricklayers, the company's contractual obligation to make contributions based on where the employee's work was performed remained unaltered. This meant that when a member of the DuPage Bricklayers performed plastering work in Local 5's territory, G&J was obligated to make contributions to the Local 5 Funds. By contrast, for work performed by members of Local 5 or the Lake County Plasterers, the company would make contributions based on the union membership of the employee performing the work, no matter where the employee's work was performed. As we shall see, the money-follows-the-man rule had the effect of confining the bulk of G&J's liability in this case to work performed by members of the DuPage Bricklayers.

Second, certain of the Local 5 Funds had reciprocal agreements with their counterparts at other unions, including the DuPage Bricklayers Funds, pursuant to which they would forward contributions received for work performed within Local 5's jurisdiction by members of other unions to the funds affiliated with the home locals of those workers. Local 5's health and welfare fund and its pension fund both were parties to such agreements. In terms of the damages that the Local 5 Funds sought in this case for work performed by the DuPage Bricklayers members within Local 5's territory, the reciprocal agreements took the company's obligations to those two funds off the table.

In November 2002, the National Labor Relations Board ("NLRB") conducted an election among G&J's plastering employees to determine which union would thereafter serve as their exclusive collective bargaining representative. The NLRB certified the DuPage Bricklayers as the winner of that election on November 14, 2002. As a result, Local 5 ceased being the representative of any of G&J's plastering employees, G&J "exited" the collective bargaining agreement with Local 5, and G&J had no obligation to make contributions to Local 5 or to any of its fringe benefit funds for plastering work performed after November 14, 2002.

The end of Local 5's tenure as a representative of G&J employees and G&J's corresponding obligations under the collective bargaining agreement with Local 5 triggered an exit audit to determine the amounts of any outstanding obligations to the Local 5 Funds. The plaintiffs informed G&J that their auditors, the firm of Piotrowski & Gebis ("P&G"), would be reviewing G&J's contributions for the period from February 1, 1993 through November 14, 2002. That audit commenced in February 2003.*fn3

Problems soon emerged. In response to a questionnaire from the Local 5 Funds, G&J revealed that it had been making contributions based on the home local of each employee rather than the location of the work performed, as required by the various collective bargaining agreements. Still, it was possible, in view of the money-follows-the-man rule and the reciprocal arrangement that some of the Local 5 Funds had with their counterpart funds, that the Local 5 Funds had received some if not all of the monies to which they were entitled despite G&J's error in the method of contribution. The Local 5 Funds decided that they would have their auditors review G&J's work records for the last eighteen months of the audit period. G&J had preliminarily indicated that it had records as to the location of the work performed by its plasterers going back that far. If analysis of the records for that period revealed that the Local 5 Funds had been paid what they were entitled to, then the Funds would assume that G&J had paid them what they were owed in prior years. But when P&G asked the company to provide whatever work location records it had for that purpose, G&J finally disclosed that in fact it had no records showing where its employees had performed their work. Testimony at trial would later lead the trial court to find that G&J had never kept such records, notwithstanding its contractual obligation to make employee benefit contributions based on the territory in which each employee was engaging in plastering work.

P&G thus was left to its own devices in attempting to determine the extent of G&J's outstanding liability to the Local 5 Funds. Based on G&J's payroll records, the auditors attempted to ascertain instances in which the company should have made, but in fact did not make, contributions to the Local 5 Funds for work performed within Local 5's jurisdiction. Having in mind the money-follows-the-man rule that applied to members of Local 5 and the Lake County Plasterers, the auditors' principal focus was on the hours worked by members of the DuPage County Bricklayers. G&J owed contributions to the Local 5 Funds for any hours worked by DuPage Bricklayers within Local 5's territory. But because G&J's records did not reveal where individual employees worked on any given day, the dilemma posed to P&G was how to determine what the company actually owed the Local 5 Funds for work performed by DuPage Bricklayers in Local 5's territory. Given the lack of the data necessary to make that determination, the auditors applied a set of assumptions to the data available to them and prepared what is known as a Report On Agreed-Upon Procedures, with the "procedures" being the assumptions agreed to between P&G and its clients. For example, because G&J's records did not reveal the locations in which its employees had worked on any given day, P&G assumed that all work performed by members of the DuPage Bricklayers during the audit period was work performed within Local 5's territory, such that the company should have made contributions to the Local 5 Funds (excluding the pension and health and welfare funds, which had reciprocal agreements with their counterparts) for the entirety of that work. G&J's records also revealed that the company had paid a number of bonuses to its plasterers. But because G&J had no written bonus plan and no documentation of the basis for the bonuses, P&G assumed that all such bonus payments were really compensation for hours worked and that contributions to the Local 5 Funds should have been made based on these payments. P&G applied these and other assumptions to G&J's payroll data and came up with a calculation of what G&J owed the Local 5 Funds in delinquent contributions. P&G partner Gary Gebis would later discuss the set of assumptions P&G auditors had applied both in his deposition and in his trial testimony. Gebis made clear that he did not vouch for the accuracy of the assumptions. P&G's report, issued in April 2004, thus was not one which expressed a professional opinion as to how much G&J actually owed in delinquent opinions. Instead, it simply reflected what the company might owe the Local 5 Funds given the application of the various assumptions to G&J's payment records.

The P&G report set forth roughly four categories of work hours for which it was posited that contributions were owing to the Local 5 Funds and to Local 5 itself:

(1) jurisdictional hours, based on the assertion that G&J had erroneously made contributions to the DuPage Bricklayers Funds rather than the Local 5 Funds for work that was performed within Local 5's territory, (2) hours corresponding to payments given to employees that the company described as bonuses (and as such would be exempt from any contribution requirement) but which P&G had assumed were actually for work performed, (3) working assessments (dues) owed to Local 5 for hours worked by Local 5 members within Local 5's jurisdiction, and (4) other hours for which P&G believed contributions were owed. By P&G's calculation, the contributions and working assessments owed on these hours totaled $849,982.72. That total was later reduced to $815,861.02 when the plaintiffs withdrew, inter alia, any claims for work performed from February 1, 1993 through September 30, 1993. G&J rejected the analysis of the audit in toto and denied any liability for unpaid contributions.

Local 5 and the Local 5 Funds filed this suit while the audit was underway. The parties consented to final disposition by Magistrate Judge Schenkier, who conducted a three-day bench trial. Over G&J's objection, Judge Schenkier admitted P&G's audit report into evidence and permitted Gebis to testify about the report although he was ...


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