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BOARD OF TURSTEES OF LOCAL 41 v. ZACHER

September 12, 1991

BOARD OF TRUSTEES OF LOCAL 41, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS HEALTH FUND, BOARD OF TRUSTEES OF LOCAL 41, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS ANNUITY FUND, AND BOARD OF TRUSTEES OF LOCAL 41, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS PENSION FUND, PLAINTIFFS,
v.
ROBERT ZACHER AND ROBERT ZACHER, INC., A DOMESTIC CORPORATION, BOTH INDIVIDUALLY AND D/B/A PARTNERS UNDER THE NAME OF ROBERT ZACHER ELECTRIC, A/K/A ZACHER ELECTRIC, A PARTNERSHIP, DEFENDANTS.



The opinion of the court was delivered by: Skretny, District Judge.

  INTRODUCTION

Now before this Court are the plaintiffs' motion for partial summary judgment and the defendants' cross-motion for summary judgment, pursuant to Fed.R.Civ.P. 56.*fn1

Plaintiffs are the Board of Trustees of Local 41, International Brotherhood of Electrical Workers ("Local 41"), Health Fund ("Health Fund"), Board of Trustees of Local 41, Annuity Fund ("Annuity Fund") and Board of Trustees of Local 41, Pension Fund ("Pension Fund") (collectively referred to as "the Funds"). The three named defendants in this lawsuit, Robert Zacher, Robert Zacher Inc. and Robert Zacher Electric*fn2 all constitute a single electrical business founded and managed by Robert Zacher and from time to time known by any of these names. Therefore, this Court shall collectively refer to the defendants as "Zacher."

This lawsuit involves provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act ("MPPAA"), Pub.L. 96-364 (1980). Plaintiffs also assert a right to an equitable accounting under New York law. This Court has jurisdiction of this lawsuit pursuant to 29 U.S.C. § 1132, 29 U.S.C. § 185 and principles of its pendent jurisdiction.*fn3

The Funds are multiemployer pension and welfare trust funds, jointly administered by Local 41 and electrical contractor employers ("employers"), designed to provide benefits to employees performing work which is covered under a collective bargaining agreement. So that they can pay out and calculate benefits, the Funds depend on periodic monetary contributions ("contributions") and payroll reports ("reports") from employers with respect to work performed by their employees within the terms of the collective bargaining agreement. Zacher operates an electrical business and has, at certain times, made contributions and furnished reports to the Funds.

In Count One of the Amended Complaint, the Funds allege that Zacher has failed to make timely contributions to the Funds for the period from January 1987 to January 1988 as required by the collective bargaining and other agreements. The Funds seek liquidated damages and interest stemming from Zacher's delinquent payment of contributions. Thus, in their summary judgment motion the Funds do not seek the underlying contributions, for they have indisputably been paid; the Funds only seek damages and interest for the delinquency.*fn4 In Count Two of the Amended Complaint, the Funds allege that since January 1988 Zacher has failed to submit monthly payroll reports and contributions to the Funds, also as required by the collective bargaining and other agreements. In their summary judgment motion, the Funds seek an audit or an equitable accounting under New York law to discover ". . . payroll and wage information . . ." indicating the amount of allegedly owing contributions from Zacher and a court order requiring Zacher to file allegedly owing reports.

Cross-moving for summary judgment, with respect to Count One of the Amended Complaint, Zacher argues that the Funds are not entitled to either liquidated damages, because the liquidated damages provision upon which the Funds rely is void as a penalty, or interest, because the interest rate which the Funds seek to impose is usurious. With respect to Count Two of the Amended Complaint, Zacher argues that the Funds are not entitled to either an audit, because they failed to give Zacher proper contractual notice, or an accounting, as a matter of law.

In support of their motion, the Funds submit the affidavit of Gene Adams ("Adams"); the affidavit of Michael Franey ("Franey"); the supplemental affidavit of Michael Franey; the affidavit of Daniel Erker ("Erker"); the affidavit of David Roll ("Roll"); the affidavit of Craig Miller, Esq.; the deposition transcript of Robert Zacher; statements of fact; and a legal memorandum ("Funds memo.").

In support of its cross-motion, Zacher submits the affidavit of James Schmit, Esq. with exhibits; the affidavit of Robert Zacher with exhibits ("Zacher aff."); a Letter Brief dated February 12, 1991 ("Letter Brief"); statements of fact; and a legal memorandum ("Zacher memo.").

This Court has considered all these submissions and oral argument held on February 4, 1991.

Conclusion: For the reasons set forth below, with respect to Count One of the Amended Complaint this Court denies the Funds' motion for summary judgment and also denies Zacher's cross-motion for summary judgment. With respect to Count Two of the Amended Complaint, this Court denies in part and grants in part the Funds' motion for summary judgment. Also with respect to Count Two, this Court denies in part and grants in part Zacher's cross-motion for summary judgment.

FACTS

The following material facts are not in dispute.

The International Brotherhood of Electrical Workers ("IBEW") is an international labor organization representing electrical workers through local union affiliates. (Adams, ¶ 3).

The National Electrical Contractor's Association ("NECA") is an employer's association representing electrical contractors for purposes of collective bargaining with locals of the IBEW such as Local 41. (Adams, ¶ 6).

The Health Fund, Annuity Fund and Pension Fund were created in the 1960's for the purpose of providing pension and welfare benefits to union employees whose employers made contributions to the Funds as provided under a collective bargaining agreement between NECA and Local 41 known as the Inside Wireman's Agreement ("Inside Agreement"), which is amended from time to time. (Franey, ¶ 3). Health Fund is an employee benefit plan within 29 U.S.C. § 1002(1). Annuity Fund and Pension Fund are employee pension benefit plans within 29 U.S.C. § 1002 (2)(A)(i) or (ii).

Each Fund was created pursuant to a separate Agreement and Declaration Of Trust (collectively the "Declarations") and is jointly administered by a Board of Trustees consisting of representatives of Local 41 and employers appointed by NECA.*fn5

Section 4 of each Declaration provides that

  [e]ach Employer agrees that the Trustees shall
  have the right to require such reports as they
  deem necessary or desirable for the administration
  of the [relevant] Fund, and each Employer shall
  promptly furnish to the Trustees, on demand,
  records of Employees, names, social security
  numbers, hours worked by each Employee, and such
  other information as the Trustees may reasonably
  require in the administration of the Trust. For
  the purposes of compliance with this section, each
  Employer agrees to permit inspection of its
  payroll and wage records of the Employees on whose
  behalf contributions to the [relevant] Fund have
  or should be made upon receiving notice at
  reasonable hours, by the Trustees or their
  designee.

(Franey, exhs. 2, 3, 4). Each of the Declarations defines employer as

  [a]ny person, association, firm, or corporation
  who or which, as of the date of this Agreement or
  hereafter, has a collective bargaining agreement
  with the union requiring periodic contributions to
  the Trust Fund created by this Agreement and
  Declaration of Trust.

(Franey, ¶ 9) (Not from original.)

On May 1, 1985, Local 41 and NECA entered into an Inside Agreement in effect through April 30, 1988. This Inside Agreement superseded a previous Inside Agreement.*fn6

The preface to the Inside Agreement states that the Inside Agreement ". . . shall apply to all firms who sign a Letter of Assent to be bound . . ." by its terms.

Section 4.02 of the Inside Agreement provides that employers subject to the Inside Agreement shall make certain monthly payments and reports to the Funds.

Specifically, § 4.02 provides that

  The Employers agree to comply with all rules and
  regulations for the operation and maintenance of
  these Funds adopted by the Board of Trustees and
  will submit monthly payments and reports to the
  Offices of the Health, Pension, Annuity and
  Education Funds on forms furnished by the Funds.
  Failure by the Employer to submit contributions
  when they are due will result in the Employer
  being subject to a 10% penalty, interest charge,
  attorney's fees and court costs.
Section 2.06 of the Inside Agreement defines an employer
covered under the Agreement as

   . . any person, firm or corporation whose main
  business is that of an electrical contractor,
  engaged as an Employer in erecting, altering,
  installing, repairing, servicing or maintaining
  electrical wiring, devices, appliances or
  equipment, and also the purchasing of supplies and
  the selling of manufactured parts and

  products incorporated in such installations.

Local 41 and NECA entered into a separate collective bargaining agreement known as the Residential Wireman's Agreement ("Residential Agreement") which went into effect April 1, 1984 and continued in effect from May 1 through April 30, year to year, unless modified according to the procedure contained therein. The preface to the Residential Agreement states that it ". . . shall apply to all firms who sign a letter of assent to be bound . . ." by its terms.

  The Residential Agreement separately covers electrical work
performed

   . . on all units built or remodelled for family
  residence which are four stories and under,
  including basement [sic].
    'Electrical Work' shall be defined as all wiring
  for heat, power and lighting with a voltage of 480
  volts or less.
Section 2.03B of the Residential Agreement defines an employer
covered under the Residential Agreement as

   . . any person, firm or corporation whose main
  business is that of an electrical contractor,
  engaged as an Employer in residential electrical
  wiring, repairs or maintenance of new or old
  buildings used as dwellings as defined in 'TYPE OR
  [sic] WORK COVERED BY THIS AGREEMENT.'

Under the Residential Agreement, there is no provision regarding submission by employers of contributions or reports to the Funds.

In late 1978, Robert Zacher began his own electrical business. (Zacher, ¶ 6). On November 17, 1978, Robert Zacher and Gene Adams, then Business Manager of Local 41, signed two documents entitled Letters of Assent-A. Pursuant to one Letter of Assent-A, Robert Zacher, Inc. ". . . authorize[d] the New York State Chapter N.E.C.A., Inc. Buffalo Div. as its collective bargaining representative for all matters contained in or pertaining to the current approved Inside labor agreement between the Western New York State Chapter N.E.C.A. Inc. Buffalo Division and Local Union 41, IBEW." (Adams, exh. A).

Pursuant to the other Letter of Assent-A, dated November 17, 1978, Robert Zacher, Inc. ". . . authorize[d] the New York State Chapter N.E.C.A., Inc. Buffalo Div. as its collective bargaining representative for all matters contained in or pertaining to the current approved Residential labor agreement between the Western New York State Chapter N.E.C.A. Inc. Buffalo Division and Local Union 41, IBEW. (Adams, exh. A).

These Letters of Assent were approved by the IBEW's international office on November 22, 1978.

Robert Zacher signed two additional Letters of Assent-A ". . . authoriz[ing] . . ." NECA as a collective bargaining representative ". . . for all matters contained in or pertaining to the current approved Inside Wireman labor agreement between the Western New York Chapter — N.E.C.A. of Buffalo and Local 41 IBEW[,]" on behalf of Zacher Electric and Zacher Electric, Co., on June 11, 1979 and August 15, 1979, respectively. These Letters of Assent-A were also approved by the IBEW's international office. (Adams, exhs. B & C).

Zacher has not tendered written notice of termination under the Letters of Assent-A with respect to the Inside Agreement. (Adams, ¶ 26). By letter dated November 27, 1989, Robert Zacher noticed Local 41 that Robert Zacher, Inc. d/b/a Zacher Electric and Zacher Electric Co. was terminating any authority granted to NECA to collectively bargain for the Zacher entities under the Residential Agreement. (Erker, ¶ 5 and exh. 1 thereto).

On September 24, 1981, the boards of trustees of the Funds amended their respective Fund's plan to provide that

    [i]n any action brought under ERISA or other
  applicable statutes for the recovery of delinquent
  contributions, the interest rate shall be an
  effective annual rate of approximately twenty-four
  percent (24%) and the liquidated damages shall be
  at ...

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