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Mason Tenders District Council of Greater New York v. Exterior Wall and Building Consultants, Inc.

United States District Court, S.D. New York

July 13, 2017

MASON TENDERS DISTRICT COUNCIL OF GREATER NEW YORK, MASON TENDERS DISTRICT COUNCIL WELFARE FUND, PENSION FUND, ANNUTITY FUND, TRAINGING FUND, HEALTH AND SAFTEY FUND, and DOMINICK GIAMMONA, as FUNDS' CONTRIBUTIONS/DEFICIENCY MANAGER, Plaintiffs,
v.
EXTERIOR WALL AND BUILDING CONSULTANTS, INC., CONSTRUCTION AND REALTY SERVICES GROUP INC., CONSTRUCTION REALTY SAFETY GROUP., INC., DOMANI CONSULTING, INC., and DOMANI INSPECTION SERVICES INC., Defendants.

          MEMORANDUM AND ORDER

          P. KEVIN CASTEL UNITED STATES DISTRICT JUDGE.

         Plaintiffs Mason Tenders District Council of Greater New York (“The Union”), Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund, Training Fund, Health and Safety Fund (“the Funds”), and Dominick Giammona, as Funds' Contributions/Deficiency Manager, brought claims against defendants Exterior Wall and Building Consultants, Inc. (“Exterior Wall”), Construction and Realty Services Group Inc., Construction Realty Safety Group Inc., Domani Consulting, Inc., and Domani Inspection Services, Inc., under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1132(a)(3) and 1145, and § 301 of the Labor Management Relations Act of 1947 (the “LMRA”), 29 U.S.C. § 185. Defendants filed a counterclaim against plaintiffs to recover payments allegedly mistakenly made by Exterior Wall, an employer, to the Funds. Plaintiffs moved to dismiss this counterclaim. For reasons to be explained, the motion is granted.

         BACKGROUND

         Plaintiffs' complaint alleges that defendants violated one or more collective bargaining agreements, the trust agreements of the Funds, the LMRA, and ERISA. (Compl. at ¶ 2.) Specifically, the complaint alleges that during the audit period of April 1, 2011 through September 30, 2014, for twenty-two employees of defendants working as Site Safety Mangers and Fire Safety Managers within the jurisdiction of the agreements, rather than contribute to the Funds for all hours worked by these employees, defendants only reported and contributed for sufficient hours to induce the Funds to provide benefits to these employees. (Id. at ¶¶ 23-26, 29.) Plaintiffs allege that an audit found that Exterior Wall underreported the number of hours worked by these employees by 24, 384 hours, (id. at ¶ 28), and seeks delinquent fringe benefit contributions, (id. at ¶ 60), unremitted dues checkoffs and PAC contributions, (id. at ¶ 74), attorney's fees, (id. at ¶ 79), and audit costs (id. at ¶ 84).

         Defendants' counterclaim alleges that these Site Safety Mangers and Fire Safety Managers (the “Managers”) were not performing work covered by the collective bargaining agreement, and that the contributions that defendants made to the Funds were made in error. (Def.'s Counterclaim at ¶ 13.) Defendants seek the return of these funds.

         Defendants further allege that a prior dispute over fringe benefit contributions, dues checkoffs, and PAC contributions between the parties with respect to the Managers arose after the Funds conducted an October 2011 audit of Exterior Wall's books and records for the period July 1, 2006, through March 29, 2011 (the “October 2011 Audit”). (Id. at ¶¶ 8-9.)

         Defendants appear to have then maintained the same position that they do now: that the Managers “were not performing covered work and that Exterior Wall made contributions for them because of their continuing Union membership solely to ensure that they could maintain their benefits.” (Id. at ¶ 10.) Defendants allege that in May 2012 “Exterior Wall and the Funds came to an amicable resolution regarding monies allegedly owed to the Funds.” (Id.) However, Exterior Wall maintained its position regarding its obligation to pay such contributions and continued to make payments to the Funds for the Managers in the same manner as before. (Id. at 11.)

         Defendants allege that any amount for which they are liable to the Funds for deficient contributions must be indemnified by the Union, because the Union fraudulently misled them regarding the contributions due under the contract. (Id. at ¶ 19.) Specifically, defendants allege that they were misled “into believing that [they] could make contributions to the Funds solely for the purpose of enabling those Site Safety Managers and Fire Safety Managers, who were also members of the Union, to maintain benefits even though they were not performing covered work.” (Id.) Additionally, to the extent that they are liable to the Union, defendants argue that the Funds must indemnify them because “the Funds previously resolved a similar dispute with Defendants by knowingly continuing to accept remittance of contributions on behalf of the Managers despite the fact that they do not perform covered work.” (Id. at ¶ 20.)

         LEGAL STANDARD

         Rule 12(b)(6) requires a pleading, on this motion a counterclaim, to “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In assessing the sufficiency of a pleading, a court must disregard legal conclusions, which are not entitled to the presumption of truth. Id. Instead, the Court must examine the well-pleaded factual allegations and “determine whether they plausibly give rise to an entitlement to relief.” Id. at 679. “Dismissal is appropriate when ‘it is clear from the face of the [pleading], and matters of which the court may take judicial notice, that the [non-movant]'s claims are barred as a matter of law.'” Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 208-09 (2d Cir. 2014) (quoting Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 86 (2d Cir. 2000)).

         DISCUSSION

         I. Return of the Alleged Overpayments.

         While the counterclaim seeks return of payments defendants made to the Funds under Section 302 of the LMRA, such relief is not available under that statute. See Xin Wei Lin v. Chinese Staff & Workers' Ass'n, 527 F.App'x 83, 87 (2d Cir. 2013) (pursuant to 29 U.S.C. § 186(e), federal courts lack jurisdiction to award money damages for violations of §§ 186(a) and (b)) (summary order). While defendants argue that this prohibition on money damages does not extend to restitution, cases cited in the Xin Wei Lin summary order explicitly hold that restitution is also unavailable. See id. (citing McCaffrey v. Rex Motor Transp., Inc., 672 F.2d 246, 250 (1st Cir. 1982) (“It is well settled in this Circuit that district courts do not have jurisdiction under § 302(e) to award damages or restitution.”)). ERISA is the proper medium for the return of such funds.

         Under Section 403(c) of ERISA, “the assets of a plan shall never inure to the benefit of any employer, ” except under specific, enumerated circumstances. 29 U.S.C. § 1103(c). One of these exceptions permits plan administrators to return contributions to the employer “within 6 months after the plan administrator determines that the contribution was made” by “a mistake of fact or law.” 29 U.S.C. § 1103(c)(2)(A)(ii). Second Circuit precedent emphasizes the “permissive” nature of this statutory language. Dumac Forestry Servs., Inc. v. Int'l Bhd. of Elec. Workers, 814 F.2d 79, 82 (2d Cir. 1987). “[T]he ...


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