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Carpenters Combined Funds, By v. Richard A. Klingman

January 11, 2011


The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER OF COURT Pending before the Court is the MOTION FOR SUMMARY JUDGMENT (Doc. No. 25) filed by Plaintiff Carpenters Combined Funds by James R. Klein, Administrator (the "Funds"), with brief in support. Defendant Richard A. Klingman ("Klingman") has filed a brief in opposition to the motion (Doc. No. 29), and Plaintiff has filed a reply brief (Doc. No. 31). The parties have developed their respective positions regarding the Concise Statement of Material Facts ("CSMF") (Doc. Nos. 27, 28, 30, 32), and Plaintiff has submitted numerous exhibits. Accordingly, the motion is ripe for disposition.

Procedural History

On January 15, 2010, Plaintiff filed a two-count Complaint against Klingman. In Count I, Plaintiff alleges that Klingman, as the sole shareholder, officer, director and owner of R.K. Millwork Installation, LLC ("R.K. Millwork"), breached his fiduciary duty under the Employment Retirement Income Security Act ("ERISA") to submit payment of employee fringe benefit contributions to the Funds. In Count II, Plaintiff avers that Klingman's failure to submit to the Funds employee wage withholdings for union dues and political action contributions (which are not "employee benefits" governed by ERISA) constitutes the tort of conversion.

Klingman filed a Motion for More Definite Statement and a Motion to Dismiss, which the Court denied in a Memorandum Order dated March 15, 2010. On July 30, 2010, Klingman filed a Motion for Judgment on the Pleadings, in which he again asked the Court to dismiss the ERISA claim. In a Memorandum Order dated August 25, 2010, the Court denied Klingman's motion and explained that Plaintiff had adequately pled that the unpaid funds constitute "plan assets" over which Klingman is a "fiduciary." After a period of discovery, Plaintiff has moved for summary judgment on both counts of the Complaint.

Factual Background

R.K. Millwork is a signatory to a collective bargaining agreement ("Labor Agreement") with a local union affiliated with the Greater Pennsylvania Regional District Council of Carpenters (the "Carpenters Union"), a copy of which has been submitted to the Court. Klingman is the sole officer and owner of R.K. Millwork and signed the Labor Agreement on its behalf on July 4, 2007.

Under the terms of the Labor Agreement, R.K. Millwork was required to pay fringe benefit contributions to the Funds. Article VII § 4. These fringe benefit contributions were deducted from the employees' wages and were to be submitted to the Funds by the last day of each month, which were to have covered the amounts due for work done in the preceding month. Article XIII § 5 of the Labor Agreement specifies that contributions to the Funds "shall be considered delinquent if not received by the Fund Office by the last day of the month when such monthly contributions are due." In the event of a delinquency, the Employer becomes obligated to pay the principal, interest, an administrative fee/liquidated damages, and attorney fees. Id. The Labor Agreement provides that Klingman will have personal liability for unpaid contributions. Specifically, Article XIII § 4(b) of the Labor Agreement states:

The Employer [R.K. Millwork] shall be personally liable to the Carpenters' Combined Funds, Inc. for all then existing or future unpaid amounts due and payable to the Funds. In the event the Employer is a corporation, liability under this section shall be imposed not only on the corporation, but also personally on each corporate official of that Employer who is empowered to sign checks and/or execute any agreement.

It is undisputed that R.K. Millwork failed to submit employee fringe benefit contributions and wage withholdings to the Funds, as required. It is also undisputed that Klingman was responsible for the collection of all monies payable to R.K. Millwork resulting from its employees' work covered by the Labor Agreement and that he was responsible for the preparation, approval and submittal of monthly reports and payments to Plaintiff. Klingman had check writing authority and decided which bills of R.K. Millwork would be paid and which would not be paid. Klingman had discretionary control over money of R.K. Millwork and had the authority and responsibility to remit wage withholdings to the Funds. Between 2007 and present, Klingman received compensation from R.K. Millwork.

On August 14, 2009, at Civil Action No. 08-1611, a Judgment on Arbitration Award was entered in favor of the Funds and against R.K. Millwork in the amount of $124,608.56 for the unpaid employee fringe benefit contributions and wage withholdings. No testimony was presented at the arbitration proceeding, as R.K. Millwork decided to accept the Funds' representations regarding the amounts due. Pursuant to Plaintiff's Reply CSMF, the Funds assert that the "Grand Total" owed by R.K. Millwork to the Funds as of November 10, 2010 was $172,397.79. This total amount reflected the principal amounts of the unpaid fringe benefits ($92,404.78) and wage withholdings ($7,974.40) as determined by the arbitrator, and additional amounts for interest (at 15% per year) accrued as of November 10, 2010, contractual/liquidated damages (10%), and attorney fees (20%). The Judgment remains unsatisfied. Plaintiff seeks to recover the entire balance from Klingman personally, with the exception that it is not seeking contractual/liquidated damages of $1,342.98 in its conversion claim. See Plaintiff's Reply CSMF at 6 n. 1. Thus, as of November 10, 2010, Plaintiff's claim was $171,054.81.

Article VIII § 5(C) of the Labor Agreement incorporated the terms and provisions of the Agreements and Declarations of Trust which created the Funds (the "Trust Agreements"). However, there is substantial confusion regarding which Trust Agreements were actually incorporated into the Labor Agreement. Plaintiff attached various Trust Agreements which it contended had been incorporated into the Labor Agreement. In the earlier stages of this case, the Court was required to view the record in the light most favorable to Plaintiff. Defendant has strenuously denied the authenticity of the attached documents. Upon further investigation, Plaintiff has now conceded that it made a mistake. With regard to contributions owed for pension and medical benefits, Plaintiff agrees that the applicable Trust Agreements in effect at the time of R.K. Millwork's delinquencies did not contain "due and owing" language such that the unpaid contributions became "plan assets" immediately. Nevertheless, Plaintiff contends that this mistake is moot because the language of the Labor Agreement itself is sufficient to make the delinquent contributions "plan assets." In the alternative, Plaintiff contends that annuity and savings contributions of roughly $34,000 remain recoverable because the relevant Trust Agreement was incorporated and does provide that unpaid annuity and savings contributions become "plan assets" immediately.*fn1

Standard of Review

Federal Rule of Civil Procedure 56 governs summary judgment. In interpreting Rule 56, the United States Supreme Court has stated:

The plain language . . . mandates entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to material fact," since a complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 (1986).

An issue of material fact is genuine only if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The court must view the facts in a light most favorable to the non-moving party, and the burden of establishing that no genuine issue of material fact exists rests with the movant. Celotex, 477 U.S. at 323. The "existence of disputed issues of material fact should be ascertained by resolving all inferences, doubts and issues of credibility against the moving party." Ely v. Hall's Motor Transit Co., 590 F.2d 62, 66 (3d Cir. 1978) (quoting Smith v. Pittsburgh Gage & Supply Co., 464 F.2d 870, 874 (3d Cir. 1972)). Final credibility determinations on material issues cannot be made in the context of a motion for summary ...

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