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TRUSTEES OF NAT. ELEVATOR INDUSTRY v. LUTYK

May 4, 2001

TRUSTEES OF THE NATIONAL ELEVATOR INDUSTRY PENSION, HEALTH BENEFIT AND EDUCATIONAL FUNDS, PLAINTIFF,
v.
ANDREW LUTYK, DEFENDANT.



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

  FINDINGS OF FACT AND CONCLUSIONS OF LAW

This issue in this case is whether Andrew Lutyk, the sole director and shareholder of American Elevator Company, is personally liable for the corporation's unpaid contributions to employee benefits funds established under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. As set forth in the court's memorandum and order of April 13, 2001 addressing the parties' cross motions for summary judgment, in order for plaintiff to recover, it must prove one of two things: either 1) that under the terms of the parties' agreements, the unpaid contributions in this case are "plan assets" as that term is employed by ERISA; or, 2) that the circumstances of this case justify piercing of the corporate veil so as to impose liability for corporate obligations on the defendant personally.

The court held a nonjury trial on May 3, 2001 and, as set forth in detail below, rules: 1) that under the terms of the parties' agreements, the unpaid contributions in this case are not "plan assets"; and, 2) that the circumstances of this case justify piercing of the corporate veil. The defendant is therefore personally liable.

I. FINDINGS OF FACT

A. General Background

1. At issue in this case are three jointly trusteed labor-management trust funds created and maintained pursuant to Section 302(c)(5) of the Labor Management Relations Act, 29 U.S.C. § 186(c)(5). The three funds are the National Elevator Industry Pension Fund, the National Elevator Industry Health Benefit Fund (formerly known as the Welfare Fund) and the National Elevator Industry Educational Fund (collectively, the "NEI Funds"). The Pension Fund is an employee pension benefit plan as defined in Section 3(2) of ERISA, 29 U.S.C. § 1002(2). The Health Fund and Educational Fund are employee welfare benefits plans as defined in Section 3(1) of ERISA, 29 U.S.C. § 1002(1). All NEI Funds are also multiemployer plans as defined in Section 3(37)(A) of ERISA, 29 U.S.C. § 1002(37)(A).

2. The Boards of Trustees of the NEI Funds, the plaintiff in this case, administer the NEI Funds and are fiduciaries of the NEI Funds within the meaning of Section 3(21)(A) of ERISA, 29 U.S.C. § 1002(21)(A).

3. Defendant Andrew Lutyk incorporated American Elevator Company ("American") in late 1992 and has at all times been its president, one of its three officers, its sole director, and its sole shareholder.

4. At all relevant times, American's two other officers were Lutyk's daughter, Julie Gibbs, Treasurer, and an attorney and friend of Lutyk's, Patrick Donnelly, Secretary.

5. Aside from those hired through the union for elevator work, American had several office employees, including Gibbs, who served as office manager, as well as Lutyk's wife Martha, who worked for one or two years in the later years of the company's existence.

6. At all material times, American was an "employer" within the meaning of Section 3(5) of ERISA, 29 U.S.C. § 1002(5), and was engaged in commerce in an industry or activity affecting commerce within the meaning of Sections 3(11) and (12) of ERISA, 29 U.S.C. § 1002(11) and (12).

7. Each of the NEI Funds were created pursuant to separate agreements and declarations of trust (collectively known as the "Trust Documents"). The Trust Documents were executed and maintained pursuant to collective bargaining agreements between the International Union of Elevator Constructors, AFL-CIO ("Union") and contractors and contractor associations in the elevator industry.

8. The Standard Agreement is a collective bargaining agreement between various signatory employers and the Union. The first Standard Agreement was effective from July 9, 1992 to July 8, 1997, and the second was effective from July 9, 1997 to July 8, 2002.

9. American is bound by the terms of the Standard Agreement and the Trust Documents by virtue of its two successive contracts with the Union, the first entered into on April 27, 1993 and the second entered into on August 18, 1997.

10. Under the Standard Agreement and the Trust Documents, an employer is obligated to make monthly contributions to each of the NEI Funds. The employer's monthly contribution to each Fund is calculated by determining the total number of hours worked, including overtime, by each of the employer's covered employees in that particular month, and multiplying these total hours by the hourly contribution rates for each NEI Fund. The relevant hourly contribution rates are set forth in the Standard Agreement. In addition, with respect to the Health Benefit Fund only, an employer is obligated to deduct a certain amount from the paycheck of each covered employee for each hour worked; such employee wage deductions are considered to be "employee contributions" or employee "co-pays" to the Health Benefit Fund.

11. The Standard Agreement and the Trust Documents also obligate an employer to calculate the amount of employer payments and employee wage deductions due to the NEI Funds, and to prepare and forward a single combined monthly remittance report to the NEI Funds. The employer is furthermore required to remit its employer payments and employee wage deductions to the NEI Funds by the fifteenth day of the month following the month in which responsibility for such contributions was incurred.

B. Amounts Owed to the NEI Funds

1. The Boards of Trustees sued American in a separate 1998 suit in this district for contributions that at that time were owed to but had not been remitted to the NEI Funds, as well as for associated liquidated damages, interest, costs, and attorneys' fees.

2. That action, Civil Action No. 98-6544, culminated in a consent judgment dated June 15, 1999 whereby American agreed to pay the NEI Funds a total of $280,284.60, representing unremitted contributions in the amount of $214,453.66 (including both delinquent employer payments and employee deductions that had been withheld from paychecks but never remitted); liquidated damages of $42,890.73; interest of $21,924.21; attorney's fees of $772.50; and costs of $243.50.

3. American remitted to the NEI Funds $40,000.00 pursuant to the consent judgment prior to the filing of the instant action on May 4, 2000. It then remitted to the NEI Funds an additional sum of $2,524.74 on December 13, 2000, which represented all of the withheld employee wage deductions due under the consent judgment. These two sums represent the total amount of money paid by American pursuant to the consent judgment.

4. On May 4, 2000, the plaintiff initiated the instant suit against defendant Lutyk personally, seeking to recover from him individually the full amount that it has been unable to collect from American, as well as additional contributions accrued by American after the time of the consent judgment but never remitted. However, as set forth in the court's memorandum and order of April 13, 2001, claims as to amounts accrued prior to May 4, 1997 are time-barred.

5. Plaintiff in this action thus seeks $287,627.43 from Lutyk personally, as well as attorneys' fees and costs. The sum of $287,627.43 represents: $212,959.79 in unremitted employer payments from the period between May 1997 and November 1999, which includes those accrued both prior to and after the consent judgment; $50,388.12 in associated liquidated damages; and $23,946.98 in associated interest. This sum also represents $332.54 in liquidated damages and interest associated with the $2,524.74 in employee wage deductions paid pursuant to the terms of the consent judgment, which the parties agree was remitted after the commencement of this action. Thus, although the plaintiff seeks no employee wage deductions in this action, it does seek interest and damages on the employee wage deductions that were paid late.

6. Plaintiff seeks liquidated damages of 20% of unpaid contributions under the terms of the Trust Documents, which accords with Section 502(g)(2) of ERISA, 29 U.S.C. § 1132(g)(2), which requires liquidated damages to be awarded at the rate provided for under the benefits plan in an amount not in excess of 20% of the unpaid contributions.

7. Section 502(g)(2) of ERISA, 29 U.S.C. § 1132(g)(2), also entitles a benefits plan to interest on unpaid contributions "at the rate provided under the plan, or, if none, the rate prescribed under Section 6621 of Title 26." The interest rate for unpaid contributions in the Trust Documents is the rate used by the Internal Revenue Service at the time of the delinquencies, which is the rate prescribed under Section 6621 of Title 26.

8. There is no dispute among the parties that if Lutyk were to be found liable in this action, he would be liable for the full amount of the unpaid employer payments, liquidated damages and interest sought by plaintiff, with the minor exception of $332.54. The defendant disputes the assessment of $332.54 in liquidated damages and interest associated with the $2,524.74 that was paid on December 13, 2000 and that represents employee wage deductions due under the consent judgment. Lutyk argues that because these ...


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