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Chicago Regional Council of Carpenters Pension Fund v. TMG Corp.

United States District Court, N.D. Illinois, Eastern Division

August 29, 2016

CHICAGO REGIONAL COUNCIL OF CARPENTERS PENSION FUND, et al., Plaintiffs,
v.
TMG CORPORATION and GALLANT CONSTRUCTION COMPANY, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          MATTHEW F. KENNELLY, District Judge

         The plaintiffs, which are pension and health and welfare funds (the Funds) related to the Chicago Regional Council of Carpenters (the Union), have sued TMG Corporation and Gallant Construction Company. TMG was a signatory to a contract with the Union called the Area Agreement. The Funds allege that TMG was a sham company that Gallant used to allow it to do work covered by the Area Agreement without paying appropriate fringe benefit contributions. The Funds contend that that the two defendants were in fact a single employer or that TMG was Gallant's alter ego. Both sides have moved for summary judgment. For the reasons stated below, the Court grants the Funds' motion in part and denies defendants' motion.

         Background

         The following facts are taken from the parties' summary judgment materials. Gallant and TMG were formed on the same day, TMG by Tom Galante and Gallant by his brother Michael Galante. To avoid confusion, the Court will refer to each of the Galantes by his first name.

         Tom and Michael each had the same registered agent and the same address in Maywood, Illinois, even though TMG had no office at that location. Tom was the sole shareholder, officer, and director of TMG, and Michael was the sole shareholder, officer, and director of Gallant until 1998, when Kevin Krak acquired half of the company. Krak acquired full ownership of Gallant in 2002 and is now Gallant's sole shareholder, officer, and director. Tom remained the sole shareholder, officer, and director of TMG until its dissolution in 2014, during the course of this litigation.

         Both companies operated in the construction industry, performing remodeling services for their clients. Although there was no formal agreement between Gallant and TMG until 2007, the two companies worked together closely from their inception. In fact, Gallant was TMG's only customer throughout its entire existence, and the only payments for services that TMG ever received came from Gallant. Gallant, on the other hand, employed supervisors through its subcontract with TMG, through subcontracts with other entities, and through direct, independent contracts.

         The plaintiffs are multi-employer trust funds that provide pension, welfare, training and other benefits to Union members and their families. Each trust fund is organized, administered, and governed according to an agreement, which sets out the terms of its services and fund distributions. Additionally, the Trust Funds are collectively administered according to the terms of a collective bargaining agreement known as the Area Agreement. The Area Agreement provides in relevant part that:

EMPLOYER shall not contract or subcontract any work coming within the jurisdictional claims of the UNION or any person, firm or corporation not covered by a Collective Bargaining Agreement with the UNION provided, however, that the provision of the paragraph shall apply only to the contracting and subcontracting of work to be done at the site of construction, alteration, painting or repair of a building, structure, or other work.
EMPLOYER, in recognition of the territorial and occupational jurisdiction of the UNION, shall not subcontract or contract out jobsite work coming within the jurisdiction of the Carpenters Union nor utilize on the jobsite the services of any other person, company, or concern to perform such work that does not observe the same wage, fringe benefits, hours, and conditions of employment as enjoyed by the Employees covered by this Agreement.

Area Agreement § 3.2-3.3, Pls.' Ex. A at Ex. 5.

         TMG was a signatory to the Area Agreement. As a result, TMG was able to employ Union workers, but it gave up the right to subcontract with non-Union entities or employees for work covered by the Area Agreement.

         Gallant, by contrast, was never a signatory to the Area Agreement. It used a non-Union work force as it wished and did not pay those workers the wages or fringe benefits required by the Area Agreement. But, through its relationship with TMG, Gallant was also able to obtain and use Union labor when it needed to do so.

         The Funds contend that TMG and Gallant were a single employer or, in the alternative, that TMG was an alter ego of Gallant. They allege that Gallant and TMG's arrangement allowed Gallant to employ Union workers nominally employed by TMG while also employing non-Union workers without paying Union wages or fringe benefits and thereby operate outside the bounds of the Area Agreement. The Funds further allege that defendants did not produce records sufficient to allow the Funds' auditors to determine whether they had complied with their obligations under the Area Agreement. In this lawsuit, the Funds seek to hold Gallant liable under the Area Agreement. The Funds seek to recover unpaid fringe benefit contributions, interest, liquidated damages, auditors' fees, and attorneys' fees and costs for the workers they hired to perform work within the scope of the Area Agreement.

         Both sides have moved for summary judgment on the issue of liability. The Court will discuss the facts ...


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