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Trustees of Sheet Metal Workers International Association Local No. 38 Insurance and Welfare Fund v. Haldean Sheet Metal Fabicators, Inc.

United States District Court, S.D. New York

November 21, 2017

TRUSTEES OF THE SHEET METAL WORKERS INTERNATIONAL ASSOCIATION LOCAL NO. 38 INSURANCE AND WELFARE FUND, et al., Plaintiffs,
v.
HALDEAN SHEET METAL FABICATORS, INC., FLORENCE HALE, and ROBERT HALE, Defendants.

          OPINION AND ORDER

          Vincent L. Briccetti United States District Judge

         Plaintiffs, Trustees of the Sheet M Workers International Association Local No. 38 Insurance and Welfare Fund, Sheet M Workers International Association Local No. 38 Profit Sharing Plan, Sheet M International Association Local No. 38 Individual Vacation Account Fund, Sheet M Workers Local 38 Labor Management Committee and Trust, Sheet M Workers Local 38 Craft Training Fund, Sheet M Workers National Pension Fund, and Sheet M Workers Local 38 Craft Training Building Fund, bring this action against defendants, Haldean Sheet M Fabricators, Inc. (“Haldean”), Robert Hale, and Florence Hale, pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002 et seq. Plaintiffs seek to collect unpaid fringe benefit contributions owed pursuant to a collective bargaining agreement between Sheet M Workers International Association Local Union No. 38 (“Local 38”) and defendant Haldean.

         Now pending are defendants' motion for summary judgment (Doc. #110) and plaintiffs' cross-motion for summary judgment (Doc. #116). For the reasons set forth below, defendants' motion is GRANTED IN PART and DENIED IN PART. Plaintiffs' cross-motion is GRANTED IN PART and DENIED IN PART.

         The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 29 U.S.C. §§ 185(a), 1132(e).

         BACKGROUND

         The parties have submitted briefs, statements of fact pursuant to Local Civil Rule 56.1, declarations and affidavits (“Aff.”), and supporting exhibits, which reflect the following factual background.

         I. The Parties

         Plaintiffs are trustees of multiemployer fringe benefit funds (the “Funds”) established and administered in accordance with the Labor Management Relations Act (“LMRA”) and the Employee Retirement Income Security Act (“ERISA”).

         Haldean is a family owned steel fabrication and installation corporation. Individual defendant Robert Hale and his late brother-in-law, Peter DeAngelis, incorporated Haldean in 1977. At an initial shareholders' meeting on June 15, 1977, Robert Hale and Peter DeAngelis adopted bylaws, appointed themselves directors of Haldean, and elected Hale's wife, defendant Florence Hale, as Haldean's President and Secretary, and DeAngelis's wife, Mary DeAngelis, as Haldean's Vice President and Treasurer.

         Haldean operated out of 581 North State Road, in Briarcliff Manor, New York. In approximately 1981, after several years renting the property, Robert Hale and Peter DeAngelis formed North State Associates Partnership and purchased the property. From that time, Haldean paid rent to North State Associates, with the rent being equivalent to North State Associates's monthly mortgage payment and common condominium charges.

         At Haldean, Robert Hale managed sheet m fabrication and installation, and Peter DeAngelis managed sales, bidding, and client relationships, and was assisted by Florence Hale in managing bill pay, collection, and payroll. When Peter DeAngelis died in 2009, Florence Hale and Brian Mullins, a Haldean employee, took over many of Peter DeAngelis's responsibilities.

         Haldean failed to file New York State corporate tax returns between 2009 and 2015. As a result, New York State dissolved Haldean by proclamation in 2012. In 2016, Haldean filed its tax returns and was reinstated.

         II. The Collective Bargaining Agreement

         In 1997, Haldean entered into a collective bargaining agreement (the “1998 CBA”) with Local 38. The 1998 CBA became effective July 1, 1998. Pursuant to the 1998 CBA, Haldean was required to make fringe benefit contributions to the Funds for each of its Local 38 employees.

         The 1998 CBA provided for periodic updates to the union wage scale, and contained an “evergreen” clause, stating:

This agreement shall become effective on the 1st day of July, 1998, and shall remain in full force and effect until the 30th day of April, 2002, and shall continue in force from year to year thereafter unless written notice of reopening is given not less than ninety (90) days prior to the expiration date.

(R. Hale Aff. Ex. B: 1998 CBA, Art. XIII § 4). Following the 1998 CBA, Haldean was not provided a subsequent CBA, and neither Haldean nor Local 38 issued a notice of reopening, written or otherwise.

         Local 38 entered into collective bargaining agreements in 2002, 2012, and 2015 (the “subsequent CBAs”). However, Haldean did not receive or sign the subsequent CBAs.

         III. Haldean's Delinquent Fringe Benefit Contributions

         Wendy Santucci, an employee of the Funds, was responsible for union employers' remittance of fringe benefit contributions. On a monthly basis, employers provided Santucci a record of employee hours worked. Santucci then created an invoice reflecting benefit contributions owed.

         Haldean participated in this process, but in 2009 Haldean fell on hard times - Peter DeAngelis died suddenly, Florence Hale was in poor health, and, according to defendants, business was down. Haldean became delinquent in its benefit contributions, and by 2011 ceased reporting employee hours to Santucci altogether. Santucci nevertheless input estimated hours for Haldean's employees on a monthly basis, crediting their vacation and annuity accounts, which caused fund monies to be released. Santucci testified she credited those accounts in particular because she was aware that workers reviewed them, and would notice any shortfall. Thus, despite Haldean's delinquency, those accounts were paid and up to date for Haldean's employees.

         Santucci was also required to keep a record of employers whose benefit contributions were delinquent or unpaid. Santucci provided the Funds' manager, Mark Modzeleski, a list of such employers each month. Modzeleski reviewed the list and forwarded it to Local 38. Richard Pagano replaced Modzeleski in 2014, and he followed the same procedure.

         In a number of telephone conversations, Santucci and Florence Hale discussed Haldean's delinquent benefit contributions. Despite her discussions with Florence Hale about Haldean's arrears, Santucci never relayed to Modzeleski or Pagano that Haldean's benefit contributions were unpaid.

         Haldean's six year delinquency ultimately was discovered in March 2015. Santucci was supposed to send the National Pension Fund employer hours on a monthly basis, but at that time she instead sent a single submission of Haldean's hours for the years 2009-2015 (the “relevant time frame”). Pagano questioned Santucci, who admitted she had not reported Haldean's failure to make benefit contributions. As a result, the Funds terminated Santucci.

         On November 12, 2015, the Funds obtained a consent judgment against Santucci in the amount of $1, 682, 509.94. Santucci remitted her retirement fund in partial satisfaction of the judgment.

         IV. Haldean's Payroll Audit

         Although Local 38 typically audits employers every three years, Haldean was not audited between 2003 and 2015. In 2015, after the National Pension Fund advised Pagano there was an issue with Haldean's hours, the accounting firm Novak Francella conducted a payroll audit. Novak Francella's report reflected that for the period January 1, 2009, to June 30, 2015, Haldean owed the Funds $1, 682, 509.94. Of that amount, $321, 689.31 is interest, and, according to defendants, $213, 720.72 represents contributions Haldean withheld from its employees' wages but failed to remit to the Funds.

         DISCUSSION

         I. Summary ...


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