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Laborers Pension Fund v. Innovation Landscape, Inc.

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

December 9, 2019

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, Administrator of the Funds, Plaintiffs,
v.
Innovation Landscape, Inc., Defendant.

          MEMORANDUM OPINION AND ORDER

          MANISH S. SHAH, UNITED STATES DISTRICT JUDGE

         Fuertes Systems Landscaping, Inc. (which refers to itself as “Fuerte”) was a union signatory company owned by Rafael Hurtado that provided residential landscaping, public park construction, and snow removal services in northeast Illinois. Since 2011, two lawsuits-which concern unpaid union obligations over two different time periods-have been filed against Fuerte, including this one. These lawsuits made it difficult for Fuerte to obtain new work, and Fuerte eventually shut down in 2016. As Fuerte struggled, Nataly Perez, Hurtado's stepdaughter, decided to open a nonunion landscaping company, Innovation Landscape, Inc., in 2014. With Hurtado's help, Innovation started as a residential landscaping company and grew to provide public park construction and snow removal services in northeast Illinois. Plaintiffs filed this motion for partial summary judgment, alleging that Innovation should be liable for Fuerte's obligations under its collective bargaining agreement because the two entities are the same company under an alter-ego or single-employer theory.

         I. Legal Standard

         Summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits” show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A genuine dispute over a material fact exists when a reasonable jury could return a verdict for the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). All facts and reasonable inferences are drawn in the light most favorable to the nonmovant. Laborers' Pension Fund v. W.R. Weis Co., Inc., 879 F.3d 760, 766 (7th Cir. 2018). If the movant bears the burden of persuasion at trial, it must support its motion with credible evidence that would entitle it to a directed verdict if not controverted at trial. Celotex Corp., 477 U.S. at 331.

         II. Background

         A. Evidentiary Standards

         When ruling on summary judgment, “a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder.” Johnson v. Rimmer, 936 F.3d 695, 705-06 (7th Cir. 2019) (internal citation omitted). However, parties cannot circumvent the purpose of summary judgment “by creating ‘sham' issues of fact with affidavits that contradict their prior depositions.” Bank of Illinois v. Allied Signal Safety Restraint Systems, 75 F.3d 1162, 1168 (7th Cir.1996) (collecting cases). A court may disregard new sworn testimony when it 1) contradicts that same witness's earlier sworn deposition testimony and 2) fails to explain the contradiction or resolve any disparities. Id. at 1167-68. See also Kopplin v. Wisconsin Cent. Ltd., 914 F.3d 1099, 1103 (7th Cir. 2019) (citing Bank of Illinois and applying the sham affidavit rule).

         Local Rule 56.1 statements serve to streamline the resolution of summary judgment motions by having the parties identify undisputed material facts and cite the supporting evidence. See Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 922 (7th Cir. 1994). Because of this important function, district courts can require strict compliance. Kreg Therapeutics, Inc. v. VitalGo, Inc., 919 F.3d 405, 414 (7th Cir. 2019) (citation omitted). I disregard improperly asserted facts and deem undisputed any facts not properly controverted. N.D.Ill. Local R. 56.1.

         The parties raise evidentiary issues based on the sham affidavit rule, witness credibility, and improperly controverted facts. I address below only those issues germane to the outcome of the motion.

         B. Facts

         Rafael Hurtado owned Fuerte from 2002 to 2016. [120] ¶¶ 5, 9; [131] ¶ 1.[1] The company provided residential landscaping for single-family homes, public park construction for park districts and municipalities, and snow removal services. [120] ¶ 6; [131] ¶¶ 6, 8. Fuerte serviced customers in the northeast counties of Illinois, such as Cook, Lake, DuPage, Will, Grundy, Kane, McHenry, and Boone County. [120] ¶¶ 86-87.

         Hurtado was the sole owner and shareholder of Fuerte and served as the company's president and treasurer. [120] ¶ 9; [131] ¶ 1. In this role, Hurtado communicated with park district representatives; attended construction meetings; oversaw projects; tracked employee hours; prepared estimates and bids; and interfaced with clients. [120] ¶ 10. Only Hurtado had authority to hire and fire employees and make binding decisions on behalf of the company. [131] ¶¶ 15-16.

         Since April 2004, Fuerte had been a party to successive collective bargaining agreements with a general laborers and construction workers union. [120] ¶ 1. Under the CBA, Fuerte was required to make contributions on behalf of covered employees to certain pension, health, and welfare funds-the 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, Chicago Laborers' District Council Retiree Health and Welfare Fund, and James S. Jorgensen, as the funds' administrator. Id.

         Fuerte used nonunion employees to perform residential work, which included landscaping, planting, mulching, and the installation of brick paver patios, driveways, retaining walls, and outdoor patio kitchens. [131] ¶ 3. Fuerte's public park construction work was performed by union employees and involved “retaining walls, paving, drainage, landscaping, concrete work, excavating, playground installation and park development.” [120] ¶¶ 6-7. The CBA covered many of these residential and commercial tasks, which were required to be performed by union employees. Id. ¶ 8.[2]

         In October 2011, the funds filed a lawsuit against Fuerte to collect union dues and benefits owed from January 2008 through January 2012. Id. ¶ 3. The funds sought over $4 million in back contributions, liquidated damages, and interest. Id. In that case, the court entered judgment against Fuerte in the amount of $3, 409, 308.11. See Laborers' Pension and Welfare Funds, et al. v. Fuerte Systems Landscaping, Inc., et. al., No. 11-CV-7401, Dkt. No. 210 (N.D. Ill. Aug. 29, 2018). In October 2015, plaintiffs filed this lawsuit about unpaid union dues and benefits from January 31, 2012, onwards. [120] ¶ 4. On March 21, 2016, I entered judgment against Fuerte in the amount of $668, 236.99 in unpaid fringe benefits and union dues. Id. ¶ 89.

         Rosy Hurtado, Rafael Hurtado's wife and Fuerte's office manager, explained that due to the lawsuits, as of March 2013, insurance companies refused to provide bonds Fuerte needed to secure new public park construction work. Id. ¶¶ 25-27.[3] As a result, Hurtado had to close Fuerte, which stopped providing services by February 2, 2016. [120] ¶ 27; [131] ¶ 45. Hurtado believed the funds conspired to put Fuerte out of business: “the Union went really dirty on me, ” he said. [120] ¶ 90; [131] ¶ 6.

         The funds argue that Innovation Landscape, Inc., a nonunion landscaping company owned by Hurtado's stepdaughter, Nataly Perez, is a disguise for Fuerte, and should be held responsible for Fuerte's legal obligations under the CBA. [109]; [120] ¶¶ 14, 37.

         Before incorporating Innovation, Perez worked as a secretary at Fuerte from June 2013 to February 2014. [120] ¶¶ 14, 37. She performed clerical tasks only, like answering phone calls, taking messages, and running errands. Id. ¶ 14. After working as a secretary-and only one year after graduating high school-Perez opened Innovation in March 2014. Id. ¶¶ 37-38. She was the sole shareholder and officer of Innovation and initially paid herself $400.00 per week. Id. ¶ 38. Perez testified that she made an initial $200.00 shareholder contribution but did not obtain any business loans or contemplate any type of business plan. Id. ¶¶ 39-40. Neither Fuerte nor Hurtado provided any start-up capital, loans, or guarantees to Innovation. [131] ¶ 5. Innovation did, however, operate from Hurtado's residence, on Mirage Avenue, Plainfield, Illinois, in 2014. [120] ¶ 37.

         In 2013, Fuerte stopped providing residential landscaping for single-family residences. [131] ¶ 3. Instead, Fuerte referred residential work, including warranty repair work, to Innovation when it opened in 2014. Id. In one instance, Fuerte admits it subcontracted residential warranty repair work to Innovation and paid Innovation for this work. [120] ¶ 45; [131] ¶ 4. Meanwhile, Innovation provided the same residential landscaping services Fuerte had provided. [120] ¶ 43. Innovation's largest residential project that year was valued at approximately $20, 000. Id. ¶ 47. Innovation did not own any residential landscaping equipment in 2014, so Fuerte lent Innovation the necessary equipment and tools for free-including dingos, tampers, lasers, and a dump truck. Id. ¶ 46.[4] Additionally, one of Innovation's first employees[5] was Hurtado's son, Rafael Hurtado Jr., who served as Innovation's general manager from March to November 2014. Id. ¶¶ 42, 48.[6]

         Innovation ceased operations in either October or November 2014. [120] ¶ 50; [131] ¶ 21.[7] In early November 2014, Fuerte issued Innovation a check for $11, 300. [120] ¶ 50. Perez said that the check was for residential warranty repair work that Fuerte subcontracted to Innovation, as well as taxes and debts Innovation owed to suppliers. [120] ¶ 50; [111-3] at 75-76.[8] Innovation stored its tools and materials on Fuerte's premises, in Joliet, Illinois, in 2014. [120] ¶¶ 18, 52.[9] Both Junior and Perez returned to work for Fuerte in October 2014. [120] ¶ 51; [131] ¶¶ 13-14.[10]

         In April 2015, Perez, in her personal capacity, purchased property on Plainfield Road, Oswego, Illinois. [120] ¶ 20. That August, Perez executed a two-year commercial lease with her stepfather's company, Fuerte, starting on August 1, 2015. Id.; [111-4] at 1-5. At some point that summer, the parties agree that Fuerte moved its office to the Plainfield Road property, along with some equipment. [120] ¶ 19. Some equipment remained at Fuerte's Joliet property. Id. Between August 2015 and September 2015, Fuerte paid to remodel the interior of the Oswego residence and built a cabin on the premises. [120] ¶ 21; [131] ¶ 7.

         After this lawsuit was filed in October 2015, Fuerte decided to shut down, which took a few months.[11] [131] ¶ 6. In December 2015, Fuerte stopped performing public park construction and sought legal counsel to terminate operations. Id. That same month, Perez reopened Innovation because Fuerte was “having problems” and because Hurtado was available to assist running Innovation. [120] ¶ 53. In her role as president of Innovation, Perez testified that she reported to work at “my house” on Plainfield Road, the same location Fuerte had moved into that summer under a commercial lease.[12] [111-3] at 92; [120] ¶¶ 19-20, 53.

         Hurtado immediately began helping Innovation get work.[13] While many facts about one commercial project are disputed, the parties agree that in December 2015, Hurtado referred the project to Innovation and actively helped Innovation obtain it, by meeting with the client and using his expertise to develop Innovation's proposal. [120] ¶¶ 54-56; [131] ¶¶ 23-24; [111-5] at 57.

         The last week of January 2016, Fuerte stopped providing snow removal services, and Innovation started in February 2016. [120] ¶ 58; [131] ¶ 6. While the parties dispute many facts about one contract, they agree that initially Fuerte entered into a contract with a client to provide snow plowing and salting services from approximately October 2015 to May 2016. [120] ¶ 30. Hurtado either referred or requested transferring the work to Innovation, and under a separate contract, Innovation provided the remaining snow removal services. [131] ¶¶ 9-10. To complete the job, ...


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