The opinion of the court was delivered by: Joan Humphrey Lefkow United States District Judge
Plaintiffs Laborers' Pension Fund, Laborers' Welfare Fund of the Health and Welfare Department of the Construction and General Laborers' District Council of Chicago and Vicinity, and James S. Jorgensen, Administrator of the Funds (collectively, "the Funds") filed suit against Surface Dimensions, Inc. ("Surface Dimensions"), Substrate Technologies, Inc. ("Substrate"), and William Jones, individually, seeking to recoup $249,809.37 in unpaid contributions, dues, interest, liquidated damages and audit costs, plus attorneys' fees. Plaintiffs also seek reimbursement of $104,576.35 in benefits that they allege were improperly obtained by William Jones. Plaintiffs have moved for summary judgment under Federal Rule of Civil Procedure 56 [#59]. Before the court also is plaintiffs' motion to strike selected paragraphs from the affidavits of William Jones and Lynn Jones, as well as the relevant paragraphs of defendants' Statement of Undisputed Material Facts that rely on those paragraphs [#72]. For the following reasons, plaintiffs' motion to strike is granted and its motion for summary judgment is granted in part and denied in part.
This court's jurisdiction is based on sections 502(e)(1) and (2) and 515 of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §§ 1132(e)(1) and (2); section 301(a) of the Labor Management Relations Act of 1947 ("LMRA"), as amended 29 U.S.C. § 185(a); and 28 U.S.C. § 1331 (federal question). Venue is proper pursuant to section 502(e)(2) of ERISA, 29 U.S.C. § 1132(e)(2), and 28 U.S.C. § 1391(a) and (b).
I. Surface Dimensions and Relevant Collective Bargaining Agreements
The parties do not dispute the threshold findings that the Funds are multiemployer benefit plans within the meaning of section 3(3) and 3(37) of ERISA, 29 U.S.C. §§ 1002(3) and 1002(37)(A); that Plaintiff James S. Jorgensen ("Jorgensen") is the Administrator of the Funds authorized by the Funds' trustees to act with respect to the collection of employer contributions owed to the Funds and the amounts which have been or are required to be withheld from the wages of employees in payment of union dues for transmittal to the Construction and General Laborers' District Council of Chicago and Vicinity ("the Union").*fn1 They further agree that Surface Dimensions was at all relevant times an Illinois corporation with an incorporation date of November 15, 1991; that the company was involuntarily dissolved on April 28, 2009; that it was in the business of furnishing commercial floor preparation and concrete polishing, and that it was at all times doing business within this district and an employer within the meaning of section 3(5) of ERISA, 29 U.S.C. § 1002(5), and section 301(a) of the LMRA, 29 U.S.C. § 185(c). It is further undisputed that the Union is a labor organization within the meaning of 29 U.S.C. § 185(a). The Union and Surface Dimensions have been parties to successive collective bargaining agreements ("CBAs"), the most recent of which became effective on June 1, 2006.
Surface Dimensions entered into a Memorandum of Joint Working Agreement ("Memorandum") with the Union and Laborers' Local Union 4 on August 17, 1992. This Memorandum binds Surface Dimensions to the terms of the various area-wide negotiated CBAs between the Union and the Funds' respective Agreements and Declarations of Trust. As stated in paragraph 4 of the Memorandum:
Employees covered by the Memorandum of Agreement shall retain all the work traditionally performed by laborers. The EMPLOYER agrees that he will not cause any such traditionally performed work to be done at a construction site by employees other than those covered by this Memorandum of Agreement, except with the prior written consent of the UNION. Any EMPLOYER who contracts out or sublets any of the work coming within the jurisdiction of the UNION shall assume the obligations of any subcontractor for prompt payment of employees' wages and other benefits, including reasonable attorneys' fees incurred in enforcing the provisions hereof. Notwithstanding any agreement to the contrary, the EMPLOYER'S violation of any provisions of this paragraph will give the UNION the right to take any other lawful action, including all remedies at law or equity.
The Agreements require that Surface Dimension submit benefit reports and contribution payments by the tenth day of the following month. Payments which are not received within 30 days of this date are assessed liquidated damages in the amount of 10 percent (or 20 percent for pension, welfare and training fund contributions after June 1, 2007) of the principal amount of delinquent contributions, as well interest at a rate of 12 percent compounded annually from the date of delinquency forward. Surface Dimensions is further obligated to submit its books and records to the Funds for periodic audits to determine benefit-contribution compliance. A revised audit of Surface Dimensions books and records for the period from January 1, 2001 through September 30, 2006 revealed a total of $249,809.37 in unpaid contributions.*fn2 See Pl.'s Ex. A, ¶ 5, Declaration of Rocco Marcello ("Marcello Dec."); Pl.'s Ex. A-8. Surface Dimensions has not obtained and maintained a surety bond in accordance with the terms of the CBA.*fn3
II. William Jones and Lynn Jones' Involvement with Surface Dimensions and Substrate William Jones ("Jones") testified that at all times relevant he was the president of Surface
Dimensions. His duties included bidding jobs, performing jobs, fixing equipment, delivering equipment, picking up equipment and billing. He testified at his deposition that he was the "leading individual" who did the hiring and firing for the company. Between 1992 and 2008, the Funds accepted contributions from Surface Dimensions on behalf of Jones for pension and welfare benefits. The pension fund has paid out a total of $29,461.19 to Jones in benefits based on hours submitted on his behalf by Surface Dimensions. The welfare fund has paid out a total of $75,115.34 in claims on behalf of Jones and his dependents for hours submitted on his behalf by Surface Dimensions. At some point while Jones was president of Surface Dimensions, he lent the company approximately $351,000.
Jones's wife, Lynn Jones, was a secretary of Surface Dimensions, as well as the 100 percent shareholder. Her duties as secretary included accounts receivable and payable, collectibles, insurance waivers and union reports. She prepared union reports based on time sheets that were submitted by the workers on a weekly basis. The time sheets were turned in directly to Lynn Jones, who checked their accuracy with her husband on a weekly basis and whenever something looked out of the ordinary. Lynn Jones was authorized to write checks and enter into contracts on behalf of Surface Dimensions. She also prepared applications for workers' compensation insurance and invoices. Additionally, Lynn Jones assisted Jones in preparing bids by calculating hours to determine whether jobs would be profitable. Lynn Jones would only visit job sites four or five times per year during the course of Surface Dimensions' operations.
Lynn Jones was also shareholder and member of Surface Dimensions
Holdings, LLC, a separate entity from Surface Dimensions.*fn4
Surface Dimensions Holdings, LLC's sole purpose is to hold
the property commonly known as 1384 Bungalow Road, located in Morris,
Illinois. Surface Dimensions was operated from this same address from
on or about September 2004 until the time it ceased operations in
Substrate is an Illinois corporation with an incorporation date of January 24, 1994. Substrate operates out of 1384 Bungalow Road in Morris, Illinois-the same address formerly occupied by Surface Dimensions and currently held by Surface Dimensions Holdings, LLC. Substrate is and always has been in the business of manufacturing floor preparation and concrete polishing equipment for wholesale.*fn5 The company purchases materials for the assembly of equipment from a third party and finishes the equipment in-house prior to distribution.
At his deposition on May 4, 2010, Jones testified that he thought he was the president of Substrate, although he conceded that he may have been removed at some point. Jones described his job duties as an adviser to Substrate. He stated that he was very instrumental in a variety of tasks, including the design and building of the equipment, the sales promotion of the equipment, the delivery of the equipment, and with the products leading to that equipment.
Several members of Jones's family hold or have held an interest in Substrate. Lynn Jones is a 51% shareholder, and her son, Joshua, is a 49% shareholder. Previously, Lynn Jones had a 34% shareholder interest, Joshua had a 33% shareholder interest, and William and Lynn's daughter, Rebecca, also had a 33% interest in Substrate.
III. The Joneses' Assertion of their Fifth Amendment Privilege
During his May 4, 2010 deposition, William Jones repeatedly asserted his Fifth Amendment privilege against self-incrimination. Jones refused to answer questions regarding the auditor's findings for work performed by Surface Dimensions and/or work payrolled through Substrate for the audit period of January 1, 2001 through September 30, 2006. Specifically, he refused to offer any information about the following issues: (1) whether the people identified in the audit performed work defined as covered under the terms of the applicable collective bargaining agreement between Surface Dimensions and the Union; (2) whether the revised audit was an accurate description of the outstanding hours due to the Funds for work performed by Surface Dimensions or Substrate; (3) whether payroll was made to employees through Substrate on work that was performed on jobs originally contracted through Surface Dimensions; (4) whether employees were intentionally paid through Substrate to avoid payment of wages and fringe benefits that would be due under the terms of the applicable CBA and trust documents between Surface Dimensions and the Union; (5) whether Surface Dimensions contracted jobs to Substrate; and (6) whether Jones had at any time discussed-with either his employees or any other individuals-paying employees through Substrate to avoid payment of wages and fringe benefits that would be due under the applicable CBA and trust documents.
Jones also asserted his Fifth Amendment privilege in refusing to answer questions regarding whether Substrate ever used, leased or shared equipment or assets with Surface Dimensions. Finally, Jones refused to discuss whether he ever employed or subcontracted work to any individuals who were employed or performed any work directly or through a subcontract of Surface Dimensions.
Lynn Jones also repeatedly asserted her Fifth Amendment privilege at her May 4, 2010 deposition. The subject matter of the questions to which she asserted her privilege closely tracked the subject matter of her husband's deposition. Specifically, Lynn Jones refused to answer questions regarding the following issues: (1) whether Substrate ever performed any type of floor preparation work or commercial floor preparation work or floor polishing work; (2) whether the individuals identified on the revised audit for the period of January 1, 2001 through September 30, 2006 performed work defined as covered under the terms of the applicable CBA and applicable trust documents between Surface Dimensions and the Union; (3) whether the hours set forth on the audit findings were true and accurate to the extent that hours contained on the audit pertained to payroll made to employees through Substrate on work that was originally contracted through Surface Dimensions; (4) whether employees were intentionally paid through Substrate to avoid payment of wages and fringe benefits that would be due under the terms of the applicable CBA and trust documents between Surface Dimensions and the Union; (5) ...