Trustees of Detroit Carpenters Health & Welfare Fund v. River City Construction Co.
Docket: No. 02-1291
Court: Court of Appeals for the Sixth Circuit; May 18, 2004; Federal Appellate Court
Trustees for various employee-benefits funds in the carpentry industry filed a lawsuit against River City Construction Company to recover unpaid employee-benefit contributions for work performed by Union members. River City contested the district court's summary judgment ruling in favor of the Funds, arguing that contributions should be calculated based on the actual hours worked by Union employees, not the hours for which they were paid. River City also claimed that alleged breaches of contract by Union officials negated its obligation to contribute. The court affirmed the district's judgment, indicating that the collective bargaining agreement (CBA) requires contributions based on "each hour worked" by Union employees at River City work sites. The Funds, as third-party beneficiaries of the CBA, sought to collect these unpaid contributions under ERISA and federal common law. After an audit revealed the hours for which River City paid Union employees, the Funds moved for summary judgment. River City failed to provide sufficient evidence to dispute its payment obligation, leading to the district court awarding the Funds $83,370.04 in delinquent contributions and $8,337.04 in liquidated damages. Upon de novo review, the appellate court found no genuine issue of material fact and supported the interpretation of the CBA that contributions are based on hours worked rather than paid. The court noted that the interpretation of potentially ambiguous terms in the CBA could still be resolved in summary judgment if evidence pointed to a single construction. The phrase "each hour worked" is interpreted to encompass all hours for which River City compensated Union employees, regardless of whether those hours were deemed productive or nonproductive. Consequently, River City is obligated to make contributions for all hours worked when some covered work was performed. In the absence of River City providing evidence of the actual hours worked, the auditor's report serves as adequate proof of the contributions owed, justifying summary judgment in favor of the Funds. River City failed to maintain necessary records as required by 29 U.S.C. 1059(a)(1), which resulted in a shift of the burden to River City to demonstrate the specific hours of covered work. The courts support the view that an employer cannot avoid liability for unpaid wages and benefits due to inadequate record-keeping. Additionally, River City contends that a factual dispute exists regarding the effectiveness of the Collective Bargaining Agreement (CBA) during the relevant timeframe due to alleged breaches by Union officials. However, as third-party beneficiaries of the CBA, the Funds are not typically subject to the same contract defenses River City might assert against the Union. Legal precedents restrict the applicability of such defenses in trust fund collection cases, emphasizing the reliance of workers on these funds for retirement. Thus, unless River City explicitly preserved the defense of breach of contract within the CBA, it cannot use the Union's alleged breach to evade its contribution responsibilities. The court ultimately affirms the district court’s summary judgment in favor of the Funds.