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Laborers' Pension Fund v. GA Paving, LLC

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

August 2, 2018

LABORERS' PENSION FUND, LABORERS' WELFARE FUND OF THE HEALTH AND WELFARE DEPARTMENT OF THE CONSTRUCTION AND GENERAL LABORERS' DISTRICT COUNCIL OF CHICAGO AND VICINITY, THE CHICAGO LABORERS' DISTRICT COUNCIL RETIREE HEALTH AND WELFARE FUND, JAMES S. JORGENSEN, Administrator of the Funds, Plaintiffs,
v.
GA PAVING, LLC, POWER PAVING CONSTRUCTION, INC., also d/b/a POWER PAVING II INC., GEORGE ANGELLILO, and ANTONIO CEFALU, Defendants.

          MEMORANDUM OPINION AND ORDER

          Robert M. Dow, Jr. 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, the Chicago Laborers' District Council Retiree Health and Welfare Fund, and James S. Jorgensen as Administrator of the Funds (collectively, “Plaintiffs”) filed a complaint against Defendants GA Paving, LLC, Power Paving Construction, Inc., George Angellilo, and Antonio Cefalu (collectively, “Defendants”) pursuant to 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) and 1145, and Section 301(a) of the Labor Management Relations Act (“LMRA”) of 1947 as amended, 29 U.S.C. § 185(a). [See 1.] This matter is before the Court on the motion to dismiss filed by Defendants Power Paving Construction, Inc. and Antonio Cefalu [54]. For the reasons stated below, Defendants' motion [54] is granted in part and denied in part. Defendant Power Paving's motion to dismiss is denied. Plaintiffs may proceed with the claims in Counts I-IV of their complaint against Power Paving. Defendant Antonio Cefalu's motion to dismiss is granted. Plaintiffs' fraud claim against Cefalu (Count VII) is dismissed without prejudice. Plaintiffs are given until September 4, 2018 to file an amended complaint against Defendant Cefalu consistent with this opinion if they choose to do so. This case is set for further status hearing on September 12, 2018 at 9:00 a.m.

         I. Background[1]

         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 the Chicago Laborers' District Council Retiree Health and Welfare Fund (the “Funds”) are multiemployer benefit plans within the meanings of ERISA §§ 3(3) and 3(37). Plaintiff Jorgensen is the Administrator of the Funds and has been authorized to act on the Funds' behalf in the collection of employer contributions that are owed to them. Plaintiff Jorgensen has also been authorized to act on behalf of the Funds in the collection of union dues that are supposed to be transmitted to the Construction and General Laborers' District Council of Chicago and Vicinity (the “Union”). The Funds have been duly authorized to serve as collection agents for the Union, meaning they have been given authority to collect from employers any union dues or benefit contributions which should have been or have been deducted from relevant employee wages. [1, ¶¶ 3-4, 15, 22.]

         Defendants GA Paving LLC (“GA Paving”) and Power Paving Construction, Inc. (“Power Paving”) are both Illinois corporations. [Id., ¶¶ 5-6.] Defendant George Angellilo is a member and General Manager of GA Paving. [Id., ¶ 7.] Defendant Antonio Cefalu is an officer and shareholder of Power Paving. [Id., ¶ 8.] Both Angellilo and Cefalu, during the relevant time frame alleged in the complaint, were supervisors with authority to hire, fire, and direct the employment of both Power Paving employees and GA Paving employees. [Id., ¶¶ 7-8.]

         At all times relevant to the complaint, GA Paving and the Union were parties to successive collective bargaining agreements (the “Agreement”). [Id., ¶ 9.] The Agreement obligates GA Paving to (1) make contributions to the Funds on behalf of employees covered by the Agreement for pension benefits, health and welfare benefits, and/or benefits for the training fund, (2) submit monthly remittance reports identifying employees covered by the Agreement and the amount of contributions to be remitted to the Funds on behalf of these employees, (3) deduct union dues from the wages of covered employees, and (4) submit to an audit on demand in order to determine compliance with these obligations. [Id., ¶¶ 16-17, 22, 24.]

         Plaintiffs allege that GA Paving has sought to avoid these obligations by paying employees who are performing GA Paving work that is covered under the Agreement and directed by GA Paving supervisors through Power Paving or in cash rather than through GA Paving itself. [Id., ¶ 10.] According to Plaintiffs, these covered employees-despite being paid by Power Paving- work with GA Paving employees, use GA Paving-owned equipment, and are supervised by both Defendants Angellilo and Cefalu on GA Paving projects. Plaintiffs contend that Defendant Cefalu (a Power Paving officer) would contact these employees and direct them to report to work at the GA Paving yard on GA Paving projects. [Id., ¶¶ 11-13.] Plaintiffs specifically name Luis Garcia and Aurelio Duran as employees who were performing work covered by the Agreement and were paid in this manner, and Plaintiffs list Nicor Gas and the City of Chicago as GA Paving projects on which these covered employees performed for GA Paving while being paid in cash or by Power Paving. [Id., ¶ 10.]

         Plaintiffs further allege that, while GA Paving is required to submit to the Funds and the Union monthly benefit contribution reports each month identifying the hours worked by covered employees, Defendant Angellilo caused GA Paving to submit false benefits and dues reports that failed to identify all covered employees and failed to accurately report all hours of work that covered employees performed. [Id., ¶¶ 35-38.] Specifically, at the direction of Angellilo and Cefalu, employees were required to report to GA Paving's yard at 5:30 a.m. to stage vehicles and assemble equipment before departing to the day's job site. However, these employees were prohibited from recording these “staging time” hours on their timecards. Furthermore, these employees were not compensated for travel time to and from the day's job site. Therefore, these employees did not receive wages or have benefit contributions submitted on their behalf for these hours that (1) went unrecorded on their time cards and (2) were not included in the benefits and dues reports submitted to the Funds and the Union. [Id., ¶¶ 40-41.]

         According to Plaintiffs, despite the audit obligations in the Agreement, both GA Paving and Power Paving failed to submit all their books and records for a requested audit for the period of March 26, 2012 to the time of the complaint's filing. [Id., ¶¶ 19, 23.] Plaintiffs therefore bring claims in their complaint against Defendants GA Paving and Power Paving for failure to submit to an audit for benefits and dues pursuant to both an alter ego theory (Counts I and II) and a single employer theory (Counts III and IV). Plaintiffs bring claims against Defendant GA Paving for failure to submit to an audit for benefits and dues on a subcontracting theory in the event that Power Paving is not found to be an alter ego of and/or a single employer with GA Paving (Counts V and VI). Plaintiffs also bring a common law fraud claim against Defendants Angellilo and Cefalu (Count VII). Defendants Power Paving and Cefalu have moved to dismiss all of Plaintiffs' claims against them.[2] [See 54.]

         II. Legal Standard

         Defendants Power Paving and Cefalu have moved to dismiss the claims against them in Plaintiffs' complaint on the basis of Federal Rule of Civil Procedure (“Rule”) 12(b)(1), Rule 12(b)(6), and Rule 9(b).[3]

         A Rule 12(b)(1) motion seeks dismissal of an action for lack of subject matter jurisdiction. If a defendant challenges the sufficiency of the allegations regarding subject matter jurisdiction, the Court accepts all well-pleaded factual allegations as true and draws all reasonable inferences in favor of the plaintiff. See Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443-44 (7th Cir. 2009); United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003) (en banc), overruled on other grounds by Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012). The party asserting jurisdiction bears the burden of establishing that jurisdiction is satisfied. Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 913 (7th Cir. 2009).

         To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the complaint first must comply with Rule 8(a) by providing “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), such that the defendant is given “fair notice of what the * * * claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (alteration in original). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the “speculative level.” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “A pleading that offers ‘labels and conclusions' or a ‘formulaic recitation of the elements of a cause of action will not do.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). Dismissal for failure to state a claim under Rule 12(b)(6) is proper “when the allegations in a complaint, however true, could not raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558. In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts as true all of Plaintiff's well-pleaded factual allegations and draws all reasonable inferences in Plaintiff's favor. Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614, 618 (7th Cir. 2007).

         Rule 9(b) requires that, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). “To satisfy the heightened pleading standard of Rule 9(b), the circumstances [of the alleged misrepresentation] must be pleaded in detail. The who, what, when, where, and how: the first paragraph of any newspaper story.” Blankenship v. Pushpin Holdings, LLC, 2015 WL 5895416, at *7 (N.D. Ill. Oct. 6, 2015) (internal quotation marks omitted; citing DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)).

         III. ...


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