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Brigadier Roofing, Inc. v. Roofers' Unions Welfare Trust Fund

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

June 30, 2017

Brigadier Roofing, Inc., Plaintiff,
v.
Roofers' Unions Welfare Trust Fund, Defendant.

          MEMORANDUM OPINION AND ORDER

          Manish S. Shah United States District Judge.

         Plaintiff Brigadier Roofing, Inc., brings claims for restitution, fraudulent misrepresentation, and negligent misrepresentation against defendant Roofers' Union Welfare Trust Fund, seeking a refund for Brigadier's payments to the Fund. The parties cross-move for summary judgment, and Brigadier also moves to strike materials from the Fund's summary judgment briefing. For the following reasons, Brigadier's motions are denied, and the Fund's motion for summary judgment is granted.

         I. Motion to Strike

         The Fund filed a Local Rule 56.1 statement of additional facts supported by a supplemental declaration from its manager, Julie Rachal, [92-3], and a declaration from Sue Bacigalupo, [92-2], secretary for the roofers' union.[1] Bacigalupo's declaration states that the union maintains records of each signatory employer's surety bond documentation, that she reviewed that documentation, that Brigadier notified the union in 2012 that its surety bond had been canceled, that the union had not received any further surety bond documentation from Brigadier, and that Brigadier informed the union in March 2015 that it was revoking its membership. [92-2]. Brigadier moves to strike Bacigalupo's declaration under Federal Rule of Civil Procedure 37(c)(1) because the Fund did not include her in its initial disclosures or interrogatory answers as a person with knowledge of the Fund's defenses. Brigadier argues that “[u]nder Rule 37(c)(1) ‘exclusion of non-disclosed evidence is automatic and mandatory . . . unless non-disclosure was justified or harmless.'” Tribble v. Evangelides, 670 F.3d 753, 760 (7th Cir. 2012) (quoting Musser v. Gentiva Health Servs., 356 F.3d 751, 758 (7th Cir. 2004)). The Fund responds that it did not need to supplement its disclosures to identify Bacigalupo because the information in her declaration was known to Brigadier (i.e., Brigadier knew that it had not notified the union that it obtained a surety bond in March 2015). The Fund also argues that there is no prejudice to Brigadier because Brigadier knew that it had not notified the union about the bond, Brigadier does not contest that it did not notify the union, and Brigadier did not seek to question other union representatives at their depositions about whether the union received notice of the bond.

         Even if the Fund did not disclose Bacigalupo as a witness with knowledge of its defenses, the Fund did disclose several union trustees, and it was obvious from the nature of this case (a dispute over contributions made to the union's welfare benefit plan) that the union was one of a few entities with possible knowledge of this dispute. Bacigalupo's declaration largely confirms otherwise undisputed facts known to Brigadier. Brigadier has admitted that its surety bond was canceled in November 2012, [92] ¶ 13, that did not notify the Fund about the surety bond until August 2016, [95] ¶ 54, and that in March 2015, it told the union that it was revoking its membership as a signatory to the collective bargaining agreement. [92] ¶ 39; [95] ¶¶ 55-56. In these circumstances, the Fund's failure to disclose Bacigalupo is harmless, and her declaration and the Fund's statements of additional facts supported by her declaration are not stricken.

         Brigadier also moves to strike paragraphs 3-8 of the Fund's statement of additional facts and paragraphs 5.a-5.f of Rachal's supplemental declaration, arguing that these paragraphs are outside Rachal's knowledge as manager of the Fund. Paragraphs 5.a-5.f detail whether other employers were performing work in the union's jurisdiction, whether they terminated their agreement with the union, or whether they had filed for bankruptcy. [92-3] ¶ 5. Rachal states in paragraph 5 that, as part of her Fund Manager responsibilities, she reviews and maintains information and records on the status of signatory employers to the union's collective bargaining agreement, including whether they obtained the required security, whether they have terminated the agreement with the union, and whether they are performing work in the union's jurisdiction. These details are within Rachal's personal knowledge and are not stricken.

         Brigadier also moves to strike paragraphs 13, 17-19, 21, 24-25, 28, 31-39, 41-44, 46, and 50-51 of the Fund's responses to Brigadier's Local Rule 56.1 statement of facts, maintaining that these responses contain legal or factual arguments, or do not cite evidence supporting the denial. This motion to strike is overbroad and denied. In many instances, the parties' Local Rule 56.1 statements of fact and corresponding responses are overbroad, argumentative, or do not cite record evidence to properly controvert the factual statement. The purpose of Local Rule 56.1 is to permit the district court to identify at summary judgment which material facts are in dispute. The parties' Rule 56.1 statements (and responses) are viewed with this principle in mind. Unless otherwise noted, the facts related below are undisputed or are considered undisputed because the responding party did not properly controvert the factual statement as required by local rule.

         II. Background[2]

         In 1995, Brigadier Roofing, Inc., signed a Memorandum of Understanding with the United Union of Roofers, Waterproofers, and Allied Workers Local No. 11, binding Brigadier to a collective bargaining agreement negotiated between the union and the Chicago Roofing Contractors Association, Inc. (of which Brigadier became a member). [92] ¶ 11; [95] ¶¶ 4, 7. The collective bargaining agreement required Brigadier to contribute to the union's related trust funds-including the Roofers' Unions Welfare Trust Fund (a multi-employee welfare benefit plan under ERISA)-and to be bound by the trust agreement creating the Fund. Brigadier was required to pay contributions to the Fund (to pay for the welfare benefits provided by the Fund) based on the hours worked by each covered employee. [92] ¶ 5; [95] ¶¶ 3, 5, 7-10, 14-17. The collective bargaining agreement also required Brigadier to furnish a surety bond or alternate security in case it became delinquent in paying employee wages or contributing to the union's trust funds. [92] ¶ 12; [95] ¶¶ 21-23. Under the collective bargaining agreement, the union could withdraw employees from the employer or use other measures if the employer failed to pay the required contributions. [95] ¶ 15. According to the trust agreement establishing the Fund, monies paid into the Fund were to remain exclusively with the Fund as an “irrevocable trust for the sole and exclusive benefit of employees” and could not be subject to sale, transfer, or assignment. [95] ¶ 18. The trust agreement also stated that “[i]n no event shall the employers, directly or indirectly, receive any refund of contributions made by them to the trust fund, either during the term of this Agreement or upon its termination.” [95] ¶ 20.

         The Fund is managed by a Fund manager and a board of six trustees (three employer and three union representatives). [92] ¶¶ 3-4; [95] ¶ 11. Under the Fund's collection procedures, signatory employers were required to timely submit contributions to the Fund for hours worked by covered employees, and in accordance with the collective bargaining agreement, the fund would monitor (monthly) the number of roofing employees to determine the proper surety bond amount. [95] ¶¶ 31, 33. A Delinquency Committee (consisting of two employer and two union trustees) had authority to make delinquency determinations and to decide consequences for delinquency. [95] ¶ 34. An employer could be deemed “Seriously Delinquent” for failing to pay contributions or maintain a proper surety bond or alternate security. [92] ¶ 16; [95] ¶¶ 25, 32. “Seriously Delinquent” was defined under the Fund's collection procedures as a “signatory employer who . . . has not posted a surety bond/alternate security escrow for six (6) or more months.” [92] ¶ 16; [95] ¶ 32. Under the collective bargaining agreement and the Fund's collection procedures, any employees of an employer deemed “Seriously Delinquent” do not accrue health and welfare benefit eligibility while the employer is not in compliance. [95] ¶¶ 26, 32.

         In March 2012, the Fund notified Brigadier that, based on the collective bargaining agreement and the company's 2011 work year, Brigadier was required to have a surety bond or alternate security escrow of $25, 000 as of June 1, 2012. [95] ¶ 36. This was the minimum escrow required under the collective bargaining agreement. [95] ¶ 36. The following month, the Fund notified Brigadier that the trustees had decided to increase Brigadier's surety bond requirement to $35, 000 (to be paid by June 1, 2012) because Brigadier's February 2012 report had an increased number of employees. [95] ¶¶ 24, 37.

         Brigadier already had a surety bond of $25, 000 but it was canceled on November 1, 2012. [92] ¶ 13.[3] Later that month, the Fund notified Brigadier that the Fund had been informed (by the union) that Brigadier's surety bond was canceled. [92] ¶ 14; [95] ¶ 38. The Fund explained that Brigadier was in violation of the collective bargaining agreement's surety bond requirement and could be found Seriously Delinquent if Brigadier did not submit a surety bond, alternate security, or escrow in the amount of $35, 000 within 30 days. [92] ¶ 14; [95] ¶ 38. Although Brigadier did not have a surety bond, it continued to pay contributions to the Fund. [92] ¶ 28; [95] ¶ 44.

         In early January 2013, the Fund notified the union that it deemed Brigadier to be “Seriously Delinquent” because of its non-compliance with the surety bond requirement. [92] ¶ 15; [95] ¶ 40. The union filed a grievance against Brigadier for violating the collective bargaining agreement by failing to obtain a proper surety bond or alternate security. [95] ¶ 41. Brigadier attended the grievance hearing on January 10, and the union notified Brigadier on January 14 that it had 60 days to obtain a proper surety bond or alternate security. [95] ¶ 41.

         That same day, the Fund also wrote to Brigadier's employees that Brigadier had been deemed Seriously Delinquent for non-compliance with the bond requirement and therefore employees who worked for Brigadier on or after the effective date of non-compliance (January 14, 2013) “WILL NOT ACCRUE CREDIT FOR WELFARE TRUST FUND BENEFIT ELIBILITY for such hours worked.” [95] ¶ 42.[4] Pursuant to the collective bargaining agreement, the trust agreement, and the Fund's collection procedures to which Brigadier was bound, as of February 2013, health and welfare coverage did not accrue for hours worked by Brigadier's employees. [95] ¶ 46.[5]

         In April 2013, the Fund wrote to Brigadier again, stating that based on the collective bargaining agreement, the company's work history, and its delinquent status, Brigadier was required to provide a surety bond or alternate security of $50, 000, which was the highest surety bond established for Brigadier in the last four years. [95] ¶ 43. That month and the following month, the Fund again wrote to several of Brigadier's employees who continued to report hours worked for Brigadier, reminding them that they would not accrue credit for hours worked for Brigadier after January 14, 2013, and until Brigadier was no longer deemed Seriously Delinquent. [95] ¶ 44.[6] Despite this notice, some employees covered under the collective bargaining agreement continued to work for Brigadier from January 2013 through May 2015, and Brigadier continued to pay contributions to the Fund for those hours worked. [95] ¶ 44. The Fund's contributions coordinator continued to send Brigadier preprinted monthly report and remittance forms for the contribution payments, knowing that Brigadier's employees would not receive credit for benefit eligibility while Brigadier was delinquent. [92] ¶¶ 28-30, 32. From February 2013 through May 2015, Brigadier paid over $65, 000 in contributions to the Fund. [92] ¶ 28.[7] From December 2013 through May 2015, Brigadier also paid around $23, 000 for COBRA health insurance for one employee who was not receiving benefits through the Fund. [92] ¶ 37; [95] ¶ 49.

         In October 2013, pursuant to Brigadier's request, the Fund wrote to Brigadier, explaining that, based on a section of the Fund's collection procedures, an employer will be deemed Seriously Delinquent for failing to provide a proper surety bond and that employees of a Seriously Delinquent employer will not accrue health and welfare benefits. [95] ¶ 47. The following month, also pursuant to Brigadier's request, the Fund provided Brigadier with a copy of the collective bargaining agreement, the Fund's collection procedures, a list of the Fund's board of trustees, and copies of correspondence sent to the union and Brigadier's employees regarding Brigadier's Seriously Delinquent status and its impact on Brigadier's employees' eligibility for benefits should they continue to work with Brigadier. [95] ¶ 48.

         Brigadier had contacted several entities to inquire about obtaining a bond, but the collective bargaining agreement also provided that in lieu of a surety bond or alternate security, the Chicago Roofing Contractors Association could post a blanket bond with corporate security on behalf of the association's members, subject to the union's approval of the amount of the bond. [92] ¶¶ 17, 20; [95] ¶ 23. In April 2014, Brigadier asked the association to post a blanket bond, but the association declined to do so. [92] ¶ 21.

         In November 2014, the Fund manager sent Brigadier a letter stating that the Fund agreed to reduce the amount of Brigadier's bond to $25, 000 if Brigadier complied with the terms of the union's grievance committee's settlement offer and if the bond was in place by December 31, 2014. The letter also stated that if Brigadier did not comply, then the Fund would reconsider Brigadier's bonding requirement. [92] ¶¶ 22-23. That same month, the union's grievance committee informed Brigadier that Brigadier was assessed a $2, 500 fine for violating the collective bargaining agreement by failing to obtain a proper surety bond. [95] ¶ 50.

         On December 23, 2014, Brigadier requested that the Fund refund Brigadier's contributions for work performed by its employees from October 2012 through November 2014 (calculated by Brigadier as $79, 598.98). [92] ¶ 41; [95] ¶ 51. The letter stated that Brigadier would sue unless it received payment by December 30, 2014. [78-28]. On ...


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