Thus, certain oral modifications to collective bargaining agreements are permissible. For example, in a case involving an expired collective bargaining agreement, the Second Circuit held that conflicting evidence raised an issue of fact as to whether the parties orally agreed to extend the effective date of their contract pending further negotiations. Local 74, Serv. Employees Int'l Union v. Ecclesiastical Maintenance Serv., Inc., 55 F.3d 105, 108-09 (2d Cir. 1995). Similarly, a district court found that conflicting evidence raised an issue of fact as to whether an employer and union orally agreed to modify the terms of their existing collective bargaining agreement to alter the seniority rights of some journeymen. Ehrenburg, 808 F. Supp. at 979-80.
I reject plaintiffs' contention that the 1986 Agreement's terms as a matter of law did not permit any oral modifications. The 1986 Agreement contains an integration clause at Article 52, but it does not explicitly state that all modifications must be in writing. Thus, the contract itself does not prohibit oral modifications, and I must look to the intentions of the parties to determine whether the alleged modifications were effective. See Ecclesiastical Maintenance, 55 F.3d at 109. Examination of the parties' intent is a question of fact. Marine Transport Lines, Inc. v. International Org. of Masters, Mates & Pilots, 878 F.2d 41, 44 (2d Cir. 1989), cert. denied, 493 U.S. 1022, 107 L. Ed. 2d 743, 110 S. Ct. 724 (1990).
Furthermore, it is undisputed that Butler and the union orally modified the terms of the 1986 Agreement to apply only to Butler's commercial projects and not its residential projects. Eron Aff. of 1/6/95, Ex. A, R. McDermott Dep. of 4/12/94, at 85 Id. Ex. B, K. McDermott Dep. of 9/29/94, at 30, 77. Union officials Kevin and Ron McDermott each admitted during their depositions that the express contract terms did not include this change. Id. Thus, it is inconsistent for plaintiffs to assert that the alleged modification regarding the Route 81 project is impermissible when the union itself endorsed a different oral modification regarding the scope of the contract. A term limiting the contract's scope to the Route 81 project is not inconsistent with Article 1 of the contract, which merely states that work by union members is within the "jurisdiction" of the agreement. As discussed above, Iron Workers Fund and Butler sharply dispute both the content and the effect of discussions between Austin and union officials when Austin signed the 1986 Agreement. These disputes raise issues of fact precluding summary judgment.
Iron Workers Fund next argues that oral contract modifications bind the union but not the fringe benefit fund. Plaintiffs state that if Butler ultimately proves that the 1986 Agreement was limited to the Route 81 project, then its appropriate remedy is to seek reimbursement. Pursuant to Section 1145 of ERISA, every employer that is obligated to make fringe benefit contributions must do so in accordance with the terms of relevant collective bargaining agreements and trust agreements.
29 U.S.C. § 1145. Section 1145 limits the defenses available to an employer against a fringe benefit fund, so that ordinary contract defenses like fraudulent inducement and abandonment will not defeat a fund's rights under the agreement. Benson v. Brower's Moving & Storage, Inc., 907 F.2d 310, 314 (2d Cir.), cert. denied, 498 U.S. 982, 112 L. Ed. 2d 524, 111 S. Ct. 511 (1990). Because of Section 1145, "once an employer knowingly signs an agreement that requires him to contribute to an employee benefit plan, he may not escape his obligation by raising defenses that call into question the union's ability to enforce the contract as a whole." Id. See also Southwest Adm'r, Inc. v. Rozay's Transfer, 791 F.2d 769, 775 (9th Cir. 1986) (en banc), cert. denied, 479 U.S. 1065, 93 L. Ed. 2d 999, 107 S. Ct. 951 (1987).
However, Section 1145 does not limit Butler's defense to this lawsuit because defendant's argument concerns the 1986 Agreement's terms rather than any defects in its formation or execution. Thus, if the oral modification regarding the Route 81 project was effective, then the fund is "not entitled to enforce a nonexistent contractual obligation" regarding other projects. DeVito v. Hempstead China Shop, Inc., 38 F.3d 651, 654 (2d Cir. 1994) (quotation and citation omitted). See also Sheet Metal Workers' Int'l Ass'n, Local 206 v. West Coast Sheet Metal Co., 954 F.2d 1506, 1509-10 (9th Cir. 1992) (holding that employer not obligated to contribute to fringe benefit fund after union was decertified because collective bargaining agreement became inoperative and had no force or legal effect).
In Benson, the Second Circuit rejected an employer's defense that the union had abandoned the collective bargaining agreement because the fringe benefit fund could rely on the written contract terms. Benson, 907 F.2d at 316. However, the Second Circuit subsequently drew a distinction between defenses that call into question the union's ability to enforce the contract as a whole and a claim that the contract by its terms does not require the employer to make contributions. DeVito, 38 F.3d at 653-54. An employer can make the latter claim even against a fringe benefit fund. Id. at 654; see also Teamsters Indus. Employees Welfare Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d 132, 138 (3d Cir. 1993).
I decline to follow the distinguishable cases Iron Workers Fund cites in support of its argument that any alleged oral modifications to the 1986 Agreement are ineffective. In a Seventh Circuit case, the court declined to enforce an oral promise that directly contradicted the written terms of a collective bargaining agreement. Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d 1148, 1155-56 (7th Cir. 1989)(en banc). In a Ninth Circuit case, the court stated that it was bound by circuit precedent to disregard a credible oral agreement between the parties and to "support unions when they impose hidden, burdensome obligations on small employers who have little or no bargaining power." Operating Eng'r Pension Trust v. Giorgi, 788 F.2d 620, 622-23 (9th Cir. 1986). Second Circuit precedent does not compel a similar result. It is a question of fact whether Butler and the union agreed to the oral modification, which does not contradict express terms of the 1986 Agreement.
Thus, although Butler clearly signed the 1986 Agreement incorporating the terms of trust agreements, it is an issue of fact whether the parties orally modified the contract's terms to limit its application to the Route 81 project. Because the parties made an undisputed oral modification of the contract to limit its scope to commercial projects, an additional oral modification is plausible in light of the conflicting evidence. Contrary to plaintiffs' contention, Butler's argument on this issue is not a fraudulent inducement defense, which I agree would be ineffective against Iron Workers Fund. Rather, defendant's argument is a permissible defense concerning the terms of the agreement itself.
B. Automatic Renewal
Butler also contends that the automatic renewal provision in the 1986 Agreement is invalid and ineffective. Because the oral modification regarding the contract's scope is a disputed issue of fact, it also is an issue of fact whether the automatic renewal provision could apply in this case. I therefore need not address the parties' arguments regarding the legal effect of the automatic renewal provision.
I find as a matter of law that the 1986 Agreement was not fully integrated. An issue of fact exists regarding whether the parties intended to orally modify the contract to apply only to the Route 81 project. Thus, I cannot determine as a matter of law the scope of the 1986 Agreement, including its termination date. I therefore deny plaintiffs' motion for summary judgment regarding Butler's obligation to make additional fringe benefit fund contributions and plaintiffs' right to conduct additional audits of Butler's records.
III. Counterclaim for fraudulent inducement
In the event that Butler is liable to Iron Workers Fund for delinquent fringe benefit contributions, defendant seeks indemnity from the union for fraudulently inducing Butler to sign the 1986 Agreement. Plaintiffs contend that Butler's counterclaim against the union must be dismissed as a matter of law because ERISA preempts it and because Butler failed to state a prima facie case. Neither argument has merit.
ERISA preemption is irrelevant to Butler's counterclaim against the union, which is governed by the LMRA. 29 U.S.C. § 185(a). Plaintiffs incorrectly state that Butler's counterclaim is governed by federal common law under ERISA, citing In re Masters Mates & Pilots Pension Plan and IRAP Litigation, 957 F.2d 1020 (2d Cir. 1992). In that case, the court considered a settlement affecting in part the indemnity rights of an ERISA plan trustee. Id. at 1029, 1032. However, Butler's counterclaim for indemnity is against the union, not Iron Workers Fund. Ans. P 39. Thus, the counterclaim does not implicate ERISA even though the amount of money for which Butler seeks indemnity is the equivalent of its delinquent ERISA contributions. See Rozay's Transfer v. Local Freight Drivers, Local 208, 850 F.2d 1321, 1325-26 (9th Cir. 1988), cert. denied, 490 U.S. 1030, 104 L. Ed. 2d 203, 109 S. Ct. 1768 (1989) (allowing fraudulent inducement claim by employer against union for amount of delinquent ERISA contributions).
In addition, I find that Butler stated a prima facie case of fraudulent inducement. Butler ultimately must prove that the union knowingly made a material false representation concerning an existing fact with an intent to defraud the employer and that Butler reasonably relied on the misrepresentation to its detriment. See Cement and Concrete Workers Dist. Council v. Lollo, 35 F.3d 29, 33 (2d Cir. 1994); see also Rozay's Transfer, 850 F.2d at 1326. Butler claims to have signed the 1986 Agreement in reliance on the union's fraudulent misrepresentation that the contract covered only the Route 81 project. Ans. P 38. Recovery is not barred even if Butler was negligent in relying upon the union's misrepresentations. Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 278 (2d Cir. 1992).
It is a question of fact whether the union made the alleged fraudulent misrepresentations to Butler. Both parties submitted conflicting evidence regarding the conversations that took place between union officials and Butler President Austin at the time Austin signed the 1986 Agreement. This evidence concerns not only the fact of the alleged misrepresentation but also the knowledge and intent of the union officials. Plaintiffs argue that the alleged misrepresentation concerns a legal consequence of the contract's terms rather than a material fact. I disagree. As discussed in Section II of this opinion, it is a question of fact whether the union made oral modifications to the terms of the contract itself.
Cf. Rozay's Transfer, 850 F.2d at 1328 (holding that fraudulent inducement claim existed where union's oral misrepresentation was contrary to contract's express terms). Plaintiffs also contend that Butler did not rely on the misrepresentation to its detriment because it received the benefit of union workers. However, unforeseen liability for benefit fund contributions constitutes recoverable damages. Id. I reject the remainder of plaintiffs' arguments because they invite me to draw factual inferences adverse to the nonmovant defendant. Consequently, plaintiffs' motion to dismiss Butler's counterclaim is denied.
IV. Discovery motion
In their April 13, 1993, request for production of documents, plaintiffs sought, among other things, all of Butler's payroll records, ledgers, W-2 forms, and individuals' earnings records from 1986 to the present. Clark Aff. of 12/13/94, Ex. G, at 4-6. Iron Workers Fund claims that these documents are relevant to determining whether Butler owes additional delinquent contributions, and if so, how much. Butler contends that the requested materials are irrelevant because they cover a period during which no collective bargaining agreement was in effect and that Iron Workers Fund already has conducted audits for periods during which Butler may have had any obligation to contribute to the fringe benefit fund. In the alternative, Butler seeks certain limitations on the scope of the plaintiffs' discovery request.
The parties brought their discovery dispute to the district court without first receiving a ruling from the magistrate judge. The record shows that the parties discussed their dispute with the magistrate on several occasions. On March 14, 1994, the parties conducted a telephone conference with Magistrate Judge Di Bianco in which he declined to rule on the discovery issue. According to the conference notes, the "parties [were] to schedule another telephone conference if they believe[d] case should go forward without resolution of the 'threshold issue.'" Dkt. No. 20. This threshold issue is the scope of the 1986 Agreement. On September 22, 1994, Magistrate Judge Di Bianco filed an order extending the time for conducting discovery and filing motions. Dkt. No. 24. However, he never ruled on the discovery dispute. Rather than make the initial determination on this issue, I deny plaintiffs' motion without prejudice to renewal before the magistrate judge. My ruling that the 1986 Agreement's scope is an issue of fact will have some bearing on the magistrate judge's decision.
For the foregoing reasons, plaintiffs' summary judgment motion is denied. In addition, I deny plaintiffs' motion to dismiss Butler's counterclaim against the union. Finally, I deny without prejudice to renewal before the magistrate plaintiffs' motion to compel discovery.
IT IS SO ORDERED.
Dated: March 19, 1996
Syracuse, New York
ROSEMARY S. POOLER
United States District Judge