The opinion of the court was delivered by: John Gleeson, United States District Judge
Plaintiff Gerald Finkel, as Chairman of the Joint Industry Board of the Electrical Industry ("JIB"), is an administrator and fiduciary of various employee benefit plans established and maintained pursuant to collective bargaining agreements ("CBAs") between Local Union No. 3 of the International Brotherhood of Electrical Workers, AFL-CIO ("Local 3") and various employers and employer associations in the electrical industry. Defendant Lite Tron Ltd. ("Limited") is a New York electrical contracting corporation, which has entered into a series of CBAs with Local 3 in effect since at least May 10, 2007. Defendant Ferdinand "Fred" Iannacone ("Iannacone") is the sole owner and president of Limited. He is also the sole owner and president of defendant Lite Tron Electrical Corporation ("Electrical"), a non-union company.
In this action, Finkel seeks to recover funds allegedly due to JIB in accordance with the terms of the CBAs to which Limited is a party. Finkel alleges that the defendants engaged in a fraudulent scheme to violate the terms of the CBAs by using Electrical, rather than Limited, to perform work covered by the CBAs and thereby defraud JIB out of contractually mandated contributions. Finkel's complaint states three causes of action. The first two are claims against Limited pursuant to sections 502 and 515 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1132, 1145, and section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185. The third is a claim against Iannacone, alleging that he is jointly and severally liable for any contributions owed by Limited pursuant to ERISA sections 502 and 515.
Iannacone has moved for summary judgment dismissing the claim asserted against him. He argues that Finkel cannot establish a basis for holding him personally liable for Limited's alleged ERISA violations, because the evidence fails to support the elements of a common law fraud claim. He further argues that Finkel's amended complaint does not allege fraud with the particularity required by Fed. R. Civ. P. 9(b). Oral argument on the motion was held on October 29, 2010. For the reasons stated below, Iannacone's motion for summary judgment is denied.
A. Terms of the Applicable
Collective Bargaining Agreements Limited is a member of the Association of Electrical Contractors, Inc. ("AEC") and has agreed to be bound to the terms of CBAs entered into by AEC and Local 3. (Def. Iannacone's 56.1 Stmt., Sept. 24, 2010, ECF No. 40 ("Def.'s 56.1 Stmt.") ¶¶ 19-20, 22.) These include a 2007 CBA effective from May 10, 2007 through May 13, 2010 and a 2010 CBA effective from May 14, 2010. (Id. ¶ 22; Am. Compl., July 19, 2010, ECF No. 31 ("Am. Compl.") ¶¶ 15-16.) Pursuant to these CBAs, Limited is required to remit certain contributions to a number of employee benefit plans within the meaning of Sections 3(3) and 3(37) of ERISA, 29 U.S.C. §§ 1002(3), 1002(37).*fn1 (Am. Compl. ¶ 18, 5.) JIB is the administrator and fiduciary of these plans within the meaning of Sections 3(16)(A)(i) and 3(21)(A) of ERISA, 29 U.S.C. §§1002(16)(A)(i), 1002(21)(A), and is therefore a third-party beneficiary of the CBAs. (Am. Compl. ¶ 5; Def.'s 56.1 Stmt. ¶ 16.; Pl.'s 56.1 Stmt. ¶ 18.)
Contributions to the ERISA plans are to be made according to rates set out in the CBAs and are based on the number of hours worked by employees performing covered work as defined in the CBAs. (Id. ¶ 18; Pl.'s 56.1 Stmt., Oct. 15, 2010, ECF No. 49 ("Pl.'s 56.1 Stmt.") ¶¶ 26-50.) Pursuant to the 2007 CBA, covered work includes the assembly, construction, and installation of electrical equipment, appliances, and apparatuses.*fn2 (Decl. Opp. Mot. Summary Judgment by Christina Sessa, Oct. 15, 2010, ECF No. 46 ("Sessa Decl."), Ex. A at 5 (2007 CBA, Article I, Section 2(c)).) In addition, the CBA provides:
If and when [Limited] shall perform any on-site construction work of the type covered by this Agreement, under its own name or under the name of another, as a corporation, company, partnership, or any other business entity including a joint venture, wherein [Limited], through its officers, directors, partners or stockholders, exercises either directly or indirectly, management control or majority ownership, the terms and conditions of this Agreement shall be applicable to all such work. (Sessa Decl., Ex. A at 23-24 ("2007 CBA, Art. III, Rule 2(g)(1)").)
In addition to remitting contributions, Limited is required to submit weekly payroll reports to JIB that set out the amount of contributions due as well as the names of, standard gross wages earned by, and hours worked by employees performing covered work. (Sessa Decl. ¶¶ 7, 16.) JIB relies on these reports to determine participants' entitlement to benefits under the terms of the various plans and to ensure that the proper amounts of contributions are paid to each plan. (Id. ¶¶ 16, 19.) JIB assesses interest on any late contributions, and the 2007 CBA provides for liquidated damages in the amount of twenty percent of any delinquent ERISA plan contributions. (Pl.'s 56.1 Stmt. ¶¶ 58, 62.)
B. Relationship Among the Defendants
Electrical and Limited are both New York corporations. (Def.'s 56.1 Stmt. ¶¶ 1, 2.) Electrical was incorporated in 1977; Limited was incorporated eleven years later. (Id.)
Electrical is a contracting company that performs demolition, molding, plastering, and painting. (Pl.'s 56.1 Stmt. ¶ 92) Electrical is a non-union company and has never been a signatory to any union contract. (Def.'s 56.1 Stmt. ¶ 25.) Prior to the events that gave rise to this action, Electrical was not performing any electrical work, such as the installation of lighting fixtures, outlets, switches, and fire alarm systems. (Decl. Opp. Mot. Summary Judgment by James R. Grisi, Ex. A, Oct. 15, 2010, ECF. No. 45 ("Iannacone Apr. Dep.") at 27-28, 34; Def.'s 56.1 Stmt. ¶ 93.)
According to Iannacone, Electrical engages Limited as a subcontractor to perform electrical work. (Def.'s 56.1 Stmt. ¶ 7.) Finkel disputes this characterization of the companies' relationship. (Pl.'s Counterstmt. To Def.'s 56.1 Stmt, Oct. 15, 2010, ECF No. 47 (("Pl.'s 56.1 Counterstmt.") ¶ 7.) At a deposition, Iannacone testified that "work is basically signed through Lite Tron Electrical, and Lite Tron Limited performs all the work." (Iannacone Apr. Dep. at 18.) However, there is no written agreement governing the relationship between the parties, either generally or with respect to individual projects. (Id. at 77-78.) Limited is not licensed by the City of New York to perform electrical work; it uses Iannacone's license, which is registered in the name of Electrical. (Def.'s 56.1 Stmt. ¶¶ 9-10, 14; Pl.'s 56.1 Counterstmt. ¶¶ 9-10.) General contractors and others who deal with the companies do not distinguish between them, and many do not even realize there are two companies. (Iannacone Apr. Dep. at 18.) Invoices, as well as purchase orders and proposals, are sometimes sent on Electrical letterhead and sometimes on Limited letterhead, regardless of which company's employees perform the work. (Id. at 85-86, 89-91; Decl. Opp. Mot. Summary Judgment by James R. Grisi, Ex. C, Oct. 15, 2010, ECF. No. 45 ("Perez Dep.") at 115-116, 119-120.) General contractors are invoiced for the total cost of services provided by the two companies; costs of material and labor are not itemized.
(Iannacone Apr. Dep. at 80-81.) Since 2005, on the advice of an accountant, Limited prepares typed invoices to Electrical for the cost of labor, and Electrical then makes payments to Limited, which in turn pays its employees. (Id.) Limited keeps no other funds in its account. (Id. at 101.)
Electrical and Limited share a common office space. (Def.'s 56.1 Stmt. ¶ 4, 6.) No written agreement allocates the use or costs of this space, but Electrical pays all rent and utility bills. (Iannacone Apr. Dep. at 30-31.) Electrical has no office employees. (Id. at 26.) Electrical used to employ office assistant Debbie Perez, who performs office functions on behalf of both companies, but in 2002 she joined a union and was transferred to Limited's payroll. (Id. at 26-27.) Neither company owns much property -- Electrical owns a truck, which has Limited's name on it, while Limited owns some hand tools, which say "Lite Tron" on them. (Id. at 18-19.) No written agreement governs either company's use of the other's property. (Id. at 19.)
Both Electrical and Limited are wholly owned by Iannacone, who is president and sole shareholder of each company. (Def.'s 56.1 Stmt. ¶¶ 3, 5.) While Iannacone's wife, Christine, is sometimes listed as the secretary of Limited -- because "in certain circumstances you need a secretary that is supposed to be on board and I put my wife's name down" -- she has no formal role in the company and knows nothing about its affairs or operations. (Iannacone Apr. Dep. at 11.) On at least one occasion, Iannacone transferred $100,000 in personal funds to Electrical to ensure that its payroll was met. (Pl.'s 56.1 Stmt. ¶ 252.) It is unclear from the record whether this transfer constituted a formal loan or investment, or was memorialized by any written agreement between Iannacone and Electrical. The record suggests that this transfer was not a unique occurrence. (Decl. Opp. Mot. Summary Judgment by James R. Grisi, Ex. N, Oct. 15, 2010, ECF. No. 45 ("Lasalle Memo") ("[Iannacone] has not established a traditional bank line for the company as Fred has personally put funds into the company when needed and opted to utilize a home equity line for cost reasons. At our meeting, it was discussed that if he is going to require bonds going forward, he will need to ...