Electrical Construction Industry Prefunding Credit Reimbursement Program v. Veterans Electric, LLC

          Submitted September 4, 2019

          Appeals from the United States District Court for the Eastern District of Wisconsin. No. 2:17-cv-01576-NJ - Nancy Joseph, Magistrate Judge.

          Before WOOD, Chief Judge, and BAUER and HAMILTON, Circuit Judges.

          BAUER, Circuit Judge.

         The International Brotherhood of Electrical Workers, AFL-CIO Local 494 and the Electrical Contractors Association Milwaukee Chapter, N.E.C.A., Inc. ("NECA"), entered into a collective bargaining agreement ("CBA") providing health, welfare, and pension benefits for union workers. The Electrical Construction Industry Pre-funding Credit Reimbursement Program, a/k/a Electrical Construction Industry Health & Welfare Plan, Electrical Construction Industry Annuity Plan, Electrical Construction Industry Pension Plan, Milwaukee Electrical Joint Apprenticeship & Training Trust Fund, and Electrical Construction Industry Vacation - Holiday Plan (the "Funds") operate as trusts for these benefits. Veterans Electric, LLC ("Veterans") participated in NECA, assented to the CBA, and contributed to the Funds for its union employees. The CBA makes multiple references to the Funds and details an audit policy.

         The Employee Retirement Income Security Act of 1974 ("ERISA") governs benefit plans between labor unions and multiemployer associations. As association members, employers agree to be bound by the CBA. Unions set up trust agreements, which set out the terms for benefit plans for union employees. Trustees may demand and examine pertinent employer records to effectively administer the trust. Signatory employers self-report benefit payments owed under the CBA.

         On May 4, 2017, the Funds attempted to audit Veterans' payroll records and Veterans only provided records for union employees. This payroll information accounted for about half of the total reported wages. Due to the discrepancy, the Funds requested payroll information for non-union employees. Veterans refused, contending that the records were outside the scope of a proper audit under the CB A. The Funds were unable to complete the audit and initiated litigation. During discovery, Veterans provided the additional payroll information.

         The district court granted summary judgment in favor of Veterans, limiting the scope of the trustees' audit authority. For the following reasons, we reverse.

         DISCUSSION

         We review the district court's grant of summary judgment de novo, construing all factual disputes and reasonable inferences in favor of the nonmovant. Landmark Am. Ins. Co. v. Deerfield Constr., Inc., 933 F.3d 806, 806 (7th Cir. 2019). Summary judgment is appropriate when the movant has shown there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).

         Prior to the merits, we first address Veterans' argument that once it furnished the payroll records to the Funds in discovery, and the Funds dismissed the original fraud charges, this case became moot. Rather than being moot, there exists a live dispute between the parties over attorney's fees. A fee award under ERISA, 29 U.S.C. § 1132(g), requires at least "some degree of success on the merits." Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 245 (2010) (quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 694 (1983)); see also Pakovich v. Verizon Ltd. Plan, 653 F.3d 488, 494 (7th Cir. 2011). Here, Veterans complied with the Funds' request for pertinent audit information after not only the threat, but the reality, of litigation. Because the Funds' right to pursue attorney's fees remains cognizable, this appeal remains ripe for adjudication and we move to the merits.

         The Supreme Court discussed this issue in Cent. States, Southeast & Southwest Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559 (1985), where an employer refused to share nonunion employee payroll information with the union trustees. Union trustees relied on employers, multiemployer association participants that are signatory to a CBA, to self-report the extent of liability. Id. at 561. Unions police employer self-reporting through random audits. Id. Certain employers refused to produce "payroll, tax, and other personnel records" of non-union employees for audit purposes. Id.

         The Supreme Court held that the "audit requested by [the trustees was] well within the authority of the trustees as outlined in the trust documents." Id. at 581. The trustees have the "right to conduct this particular kind of audit, [but it is] not their duty to do so." Ibid, (emphasis in original). In particular, "the trust documents included a number of provisions that are highly supportive of the right to audit by [the] trustees." Id. at 565. Furthermore, "an examination of the duties of plan trustees under ERISA, and under the common law of trusts upon which ERISA's duties are based, makes clear that the requested audit is highly relevant to legitimate trustee concerns." Id. at 569.

ERISA clearly assumes that trustees will act to ensure that a plan receives all funds to which it is entitled, so that those funds can be used on behalf of participants and beneficiaries, and that trustees will take steps to identify all participants and beneficiaries so that the trustees can ...