Board of Trustees of The Bricklayers of Western Pennsylvania Combined Funds, Inc. v. Molinaro Corporation et al

REPLY BRIEF re Response in Opposition to Plaintiffs' Motions for Summary Judgment

W.D. Pa.August 1, 2016

1 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA LABORERS' COMBINED FUNDS OF ) WESTERN PENNSYLVANIA, as agent ) for Philip Ameris, and Paul V. Scabilloni, ) Civil Action No. 15-1456 trustees ad litem, Laborers’ District ) Council of Western Pennsylvania ) Judge David S. Cercone Welfare and Pension Funds, ) The Construction Industry Advancement ) Program of Western Pennsylvania Fund, ) and the Laborers’ District Council of Western ) Pennsylvania and its affiliated local unions, ) ) Plaintiff, ) ) v. ) ) MOLINARO CORPORATION ) and ANTHONY LEONE, ) ) Defendants. ) ) BOARD OF TRUSTEES OF THE ) BRICKLAYERS OF WESTERN ) PENNSYLVANIA COMBINED FUNDS, INC., ) Civil Action No. 15-1455 ) Plaintiff, ) Judge David S. Cercone v. ) ) MOLINARO CORPORATION ) and ANTHONY LEONE, ) ) Defendants. ) REPLY BRIEF TO DEFENDANTS’ RESPONSE TO PLAINTIFFS’ MOTIONS FOR SUMMARY JUDGMENT Plaintiffs, Laborers’ Combined Funds of Western Pennsylvania (“Laborer Funds”) and Board of Trustees of the Bricklayers of Western Pennsylvania Combined Funds, Inc. ("Bricklayer Funds") (collectively “Funds”), by and through their undersigned counsel, Tucker Arensberg, P.C., file the following Reply Brief to Defendants’ Response to Plaintiffs’ Motions for Summary Judgment. Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 1 of 11 2 I. INTRODUCTION These suits arise out of the failure of Defendant Molinaro Corporation and its sole director/shareholder/officer, Anthony Leone (collectively “Defendants”) to submit timely payments of principal contributions and wage deductions to the Funds from February 2015 through June 2015. The Funds brought separate ERISA collection actions against Defendant Molinaro Corporation (“Molinaro”), as well as ERISA breach of fiduciary duty actions and state common law conversion actions against Defendant Anthony Leone (“Leone”). The Funds now seek summary judgment. In opposition to the Funds’ motion for summary judgment, Defendants filed a responsive brief entitled “Response to Plaintiffs’ Motions for Summary Judgment;” but notably Defendants did not file a responsive concise statement in reply to the Funds’ Concise Statement of Material Facts as required by Local Rule 56. II. FACTUAL BACKGROUND The relevant and undisputed material facts are set forth at length in the Funds’ Concise Statement of Material Facts in Support of Plaintiffs’ Motions for Summary Judgment. III. ARGUMENT In their Response to Plaintiffs’ Motions for Summary Judgment, Defendants do not address the standard for granting or denying a motion for summary judgment; they do not raise issues of material fact; and Defendants fail altogether to establish that denial of the Funds’ motion for summary judgment is warranted. Summary judgment must be granted if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial burden of showing that no genuine issues of material fact exist. See Celotex, 477 U.S. at 323. If the moving party has demonstrated an absence of material Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 2 of 11 3 fact, the nonmoving party then "must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed.R.Civ.P. 56(e)). A non-moving party may not rest upon mere allegations or general denials. Trap Rock Indus., Inc. v. Local 825, 982 F. 2d. 884, 890 (3d. Cir. 1992). Only disputes over facts that might affect the outcome of the suit under the governing substantive law will preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). If the nonmoving party fails to properly support an assertion of fact or fails to properly address another party’s assertion of fact as required by Federal Rule of Civil Procedure 56(c), the court may grant summary judgment or consider the fact undisputed for purposes of the motion. See Fed.R.Civ.P. 56(e)(2) and (3); Yun v. Great Wolf Lodge of the Poconos, ___ F. Supp.3d ___, 2016 WL 1569973, at *2 (M.D. Pa. Apr. 19, 2016). For the reasons that follow, Defendants’ arguments for the denial of the Funds’ summary judgment motion are wholly inadequate, and, as such, the Funds are entitled to judgment as a matter of law. A. Defendants have admitted Plaintiffs’ material facts. On account of Defendants’ failure to file a Responsive Concise Statement in reply to the Funds’ Concise Statement of Material Facts, all of the factual averments set forth in the Funds’ Concise Statement of Material Facts are deemed admitted for purposes of deciding the Funds’ motion for summary judgment. Local Rule 56 requires parties opposing motions for summary judgment to file a Responsive Concise Statement, responding with particularity to each of the numbered paragraphs in the moving party’s Concise Statement of Material Facts, and further setting forth other material facts that are allegedly at issue. In the event the nonmoving party does not file a Responsive Concise Statement, undisputed material facts are deemed admitted for purposes of deciding the motion for summary judgment. Local Rule 56.E sets forth at length: E. Admission of Material Facts. Alleged material facts set forth in the moving party’s Concise Statement of Material Facts . . . which are claimed to be undisputed, will for the purpose of deciding the motion for summary judgment be deemed admitted unless specifically denied or otherwise controverted by a Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 3 of 11 4 separate concise statement of the opposing party. By failing to file a Responsive Concise Statement, Defendants have admitted to all the material facts set forth in the Funds’ Concise Statement of Material Facts, which when taken together warrant summary judgment in favor of the Funds. Consistent with choosing not to file a Responsive Concise Statement, Defendants also do not challenge any of the Funds’ material facts in their “Response to Plaintiffs’ Motions for Summary Judgment.” Thus, while Defendants dispute that Leone is an ERISA fiduciary, and contend that the Funds have no right of recovery against either Leone or Molinaro, Defendants fail to come forward with specific facts showing there is a genuine issue for trial. Specifically, with regard to the Funds’ ERISA breach of fiduciary duty claims and state common law claims against Anthony Leone, Defendants do not dispute that Leone served as the sole director, shareholder and officer of Molinaro, that he oversaw the collection of all of Molinaro’s accounts receivables, that he had the sole authority to decide what Molinaro bills were to be paid, that he was responsible for overseeing the submittal of monthly remittance reports and fringe benefit contributions to the Funds, and that he was aware, or should have been aware, of the amounts owed by Molinaro to the Funds. Further, with regard to the Funds’ ERISA collection action against Molinaro, Defendants do not deny that Molinaro was obligated pursuant to its collective bargaining agreements (“CBAs”) with the Unions to submit certain monthly payments for principal contributions and wage deductions, and that from February 2015 through June 2015, Molinaro failed to submit these payments. Finally, Defendants do not contest the delinquency amounts claimed by the Funds. The only factual allegation in Defendants’ responsive brief not previously addressed by the Funds’ Concise Statement of Material Facts appears in the very last paragraph, where Defendants contend that the Funds have no right of recovery because the Funds did not supply sufficient manpower to allow Molinaro to bid larger jobs or to finish jobs in a timely manner. However, Defendants’ contention has no relevance to the Funds’ motion for summary judgment or to the Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 4 of 11 5 underlying action. First, Defendants’ factual allegation should be disregarded on the basis that Defendants failed to raise the issue in a Responsive Concise Statement as required by the Local Rules. See Local Rule 56.C (requiring nonmoving parties to “[set] forth in separately numbered paragraphs any other material facts that are allegedly at issue.”). Second, Defendants’ assertion that the Funds failed to supply manpower to Molinaro is simply inaccurate. It is obvious that the Funds do not supply manpower to Molinaro; rather, only the Unions can do so and the Unions are not parties to this action. Further, Molinaro’s complaint that it did not receive sufficient manpower is particularly unavailing given that Molinaro could have hired directly any union bricklayer or laborer directly without going through the Unions. Finally, even if it was properly alleged in a Responsive Concise Statement as required by the Local Rules, Respondents’ assertion that the Unions did not supply sufficient manpower to Molinaro is no basis for defeating the Funds’ motion for summary judgment because this allegation, whether or not true, is not material to the Funds’ claims. If this Court assumes, arguendo, that the Unions failed to supply sufficient manpower to Molinaro, or otherwise breached their CBAs with Molinaro, the Funds would still be entitled to bring an action for delinquent fringe benefit contributions against Molinaro and its management. The law is clear that a union’s breach, or even its abandonment, of a collective bargaining agreement does not obviate an employer’s obligation to make contributions to a union benefit fund. See Lewis v. Benedict Coal Corp., 361 U.S. 459, 468-69 (1960); Agathos v. Starligte Motel, 977 F.2d 1500, 1505 (3d Cir. 1992). Therefore, Molinaro’s defense that it is relieved of its contribution obligations to the Funds because it did not receive sufficient manpower from the Funds/Unions should be disallowed, rendering the question of whether the Unions, or the Funds for that matter, provided Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 5 of 11 6 sufficient manpower a moot point.1 Based on the foregoing, there is no question that Defendants have admitted to all the material facts set forth in the Funds’ Concise Statement of Material Facts, and have otherwise failed to raise a single issue of material fact. Because Defendants do not challenge any of the Funds’ material facts, all such material facts are undisputed for purposes of this motion. See Gallashaw v. City of Philadelphia, 774 F. Supp.2d 713, 716 n.6 (E.D. Pa. 2010) (holding that when a nonmoving party does not challenge a material fact, it is deemed undisputed for purposes of a motion for summary judgment in accordance with Federal Rule of Civil Procedure 56(e)(2)). B. Defendants cannot establish that the Funds’ ERISA collection actions against Molinaro fail as a matter of law. Aside from suggesting that Molinaro should be relieved of its fringe benefit obligations because the Funds/Unions did not provide Molinaro sufficient manpower, Defendants offer no argument that the Funds’ claims against Molinaro for delinquent fringe benefit contributions fail as a matter of law. As noted previously, a union’s breach or abandonment of a CBA does not obviate an employer’s obligation to make contributions to a union welfare fund. See supra. Further, as the Third Circuit has acknowledged, section 502(a) and 515 of ERISA, 29 U.S.C. §§ 1132(a), 1145, “provide a cause of action and remedies for an employer’s failure to fulfill its obligations to make pension or welfare fund contributions pursuant to a plan or collective bargaining agreement.” Ragan v. Tri-City Excavating, Inc., 62 F.3d 501, 512 (3d Cir. 1995). Here, Defendants do not contest that Molinaro was bound by CBAs with the Unions that obligated Molinaro and Leone to submit fringe benefit contributions and wage deductions to the Funds. Neither do Defendants challenge the Funds’ evidence that Molinaro failed to make timely 1 The Third Circuit recognizes only three affirmative defenses that an employer may assert against employee benefit funds seeking to recover contributions: (1) that the fund contributions themselves are illegal; (2) that the collective bargaining agreement is void ab initio; and (3) that the employees have decertified the union as its bargaining representative. See Agathos v. Starlite Motel, 977 F.2d 1500, 1505 (3d Cir. 1992); see also Operating Eng. Local 66 et al. v. Mangery & Sons of Penn, Inc., No. 08-1039 (W.D. Pa. Mar. 15, 2015) (J. Cercone) (holding that in a suit by an employee benefit fund for unpaid contributions, an employer’s defenses of estoppel, fraud in the inducement and oral modification fail as a matter of law). Here, Defendants do not raise any of the allowed affirmative defenses in their responsive brief. Defendants’ other defenses fail as a matter of law. Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 6 of 11 7 payments of principal contributions and wage deductions to the Funds from February 2015 through June 30, 2015. Finally, Defendants do not contest the delinquency amounts claimed by the Funds, including amounts the Funds claimed for interest, liquidated damages, attorneys’ fees and costs. As such, the Funds are entitled to summary judgment in their ERISA collection actions against Molinaro. C. Defendants likewise cannot establish that as a matter of law Anthony Leone is not personally liable to the Funds as an ERISA fiduciary for failing to pay fringe benefit contributions to the Funds. Defendants’ argument against holding Leone personally liable to the Funds as an ERISA fiduciary for failing to pay fringe benefit contributions to the Funds consists of perfunctorily discussing the standard for holding a corporate owner and/or officer liable as an ERISA fiduciary for unpaid fringe benefits and enjoining the Court to determine for itself “whether Leone was functioning in a fiduciary capacity.” See Brief of Defendants at 5.2 While Defendants assert that Leone never functioned as an ERISA fiduciary, they point to no facts of record to support their legal conclusions. As set forth in the Funds’ Brief in Support of Summary Judgment, there is no question that Leone is an ERISA fiduciary, and is therefore personally liable for the unpaid fringe benefit contributions Molinaro owes the Funds. Under ERISA, a corporate owner and officer that exercises any authority or control over the disposition of plan assets (i.e. fringe benefit contributions) is an ERISA fiduciary and, as such, “shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries . . . for the exclusive purpose of . . . providing benefits to participants and their beneficiaries.” 29 U.S.C. § 1104(a)(1)(A)(1); see also Laborers’ Combined Funds of W. Pennsylvania v. Cioppa, 346 F. Supp. 2d 765 (W.D. Pa. 2004); PMTA-ILA Containerization Fund v. Rose, 1995 WL 461269 (E.D. Pa. 1995); Galgay v. Gangloff, 677 F. Supp. 295 (M.D. Pa. 1987), aff'd, 932 F.2d 959 (3d Cir. 1991); Connors v. Paybra Min. Co., 807 F. Supp. 1242 (S.D. W. Va. 2 Defendants fail altogether to acknowledge or address the Funds’ state common law conversion claims against Leone. Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 7 of 11 8 1992). ERISA further provides that “any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries [by ERISA] shall be personally liable to make good to such plan any losses to the plan resulting from each such breach.. . .” 29 U.S.C. § 1109(a) (emphasis added). 29 U.S.C. § 1002(21)(A) defines the term “fiduciary” as follows: A person is a fiduciary with respect to a plan to the extent he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets. (emphasis added). Thus, to determine whether an individual is an ERISA fiduciary: “the court must determine: (1) whether the unpaid contributions were plan assets; and (2) whether [the individual] exercised discretionary control or authority over such assets.” Rose, 1995 WL 461269 at *4. Also, for purposes of determining whether unpaid contributions are plan assets under ERISA, it is well-settled that “courts strictly look to the language of the contract or trust agreement." Roofers Local 30 Combined Welfare Fund v. Lentz McGrane, Inc., 2005 WL 425582, *3 (E.D. Pa. 2005). Here, the parties agree that pursuant to the terms of the CBAs between Molinaro and the Unions, title to all monies paid or payable to the Funds are vested in the Fund trustees at the time the monies become “due and owing.” See Brief of Defendants at p. 4 (admitting that “the CBAs do contain language that title to all monies ‘due and owing’ is vested in the [Funds]”; see also Plaintiffs’ Concise Statement of Material Facts Exhibits 10B and 11B. This language is similar to the language found in Cioppa, Rose, Connors, and Galgay where the courts found that the delinquent contributions were plan assets under ERISA at the time they became “due and owing” to the Funds, as opposed to upon their payment. Cioppa, 346 F. Supp. 2d at 771; Rose, 1995 WL 461269 at *4; Connors, 807 F. Supp. at 1244; and Galgay, 677 F. Supp. at 301. Accordingly, Molinaro’s delinquent fringe benefit contributions that are “due and owing” are plan assets of the Funds. With regard to the second part of the test for determining whether an individual is an ERISA fiduciary, there is no question that Leone exercised authority and control over the Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 8 of 11 9 disposition of the Funds’ plan assets during the relevant time period. The undisputed facts show that Leone was the sole director, shareholder and officer of Molinaro; he had the sole authority to decide what Molinaro bills were to be paid or not paid; he oversaw the collection of all Molinaro’s accounts receivables; and he was responsible for overseeing the submittal of monthly remittance reports and fringe benefit contributions to the Funds. Because the unpaid fringe benefit contributions and deductions were plan assets and because Leone exercised discretionary control over these assets, he therefore qualifies as an ERISA fiduciary. He breached this fiduciary duty by failing to make the required contributions to the Funds, and, therefore, is personally liable for the same. See 29 U.S.C. § 1104(a). D. Defendants incorrectly contend that the Funds must assert facts warranting piercing the corporate veil in order to hold Leone personally liable as a fiduciary under Sections 404 and 409 of ERISA. Even though Defendants expressly recognize that ERISA imposes fiduciary duties on those who exercise authority or control respecting the management or disposition of a plan’s assets and holds these individuals personally liable for mismanagement of these assets, Defendants also assert inconsistently that “personal financial responsibility should not be imputed under ERISA to Leone merely because of the extent of control which he exercises over Molinaro,” (Brief of Defendants at p. 2), and further allege that ERISA does not provide for personal liability of corporate officers and shareholders unless the Funds plead and prove facts that justify piercing the corporate veil. Defendants’ contentions are without merit and display a fundamental misunderstanding of ERISA as it applies to corporate officers who act as plan fiduciaries by controlling plan assets. In support of their argument that Leone cannot be personally liable under ERISA absent allegations warranting the piercing of the corporate veil, Defendants rely on a line of cases addressing the liability of corporate officers for fringe benefit contributions owed to benefit funds. See Solomon v. Klein, 770 F.2d 352 (3d Cir. 1985), Int’l Molders v. United Foundries, Inc., 644 F. Supp. 499 (M.D. Pa. 1986); Amalgamated Cotton Garment v. J.B.C. Co. of Madera, Inc., 608 Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 9 of 11 10 F. Supp. 158 (W.D. Pa. 1984); Combs v. Indyk, 554 F. Supp. 573 (W.D. Pa. 1982); and Conners v. P&M Coal Co., 801 F.2d 1373 (D.C. Cir. 1986).3 Defendants’ reliance on these cases, however, is misplaced. Notably, not one of these cases addressed a corporate officer’s ERISA fiduciary duties with respect to plan assets. Rather, the theory of liability expressed by the plaintiff benefit fund trustees in Solomon, Amalgamated Cotton, Combs and Conners and noted by the court in Int’l Molders was premised on Section 515 of ERISA, 29 U.S.C. § 1145, which mandates payment of fringe benefit contributions by “employers” in accordance with their obligations under multiemployer plans and/or collectively bargained agreements.4 These cases held that a corporate officer was not an “employer” as defined by ERISA and therefore could not be held personally liable under 29 U.S.C. § 1145 absent a piercing of the corporate veil. Solomon, 770 F.2d at 353-54; ), Int’l Molders v. United Foundries, Inc., 644 F. Supp. at 502 n.1; Amalgamated, 608 F. Supp. at 167; Combs, 554 F. Supp. at 575; Conners, 801 F.2d 1377-78. However, the Funds do not seek to impose personal liability on Leone as an “employer” under ERISA by operation of Leone’s status as a corporate officer. Rather, the Complaints filed by the Funds seek personal liability against Leone for breach of his duties as a fiduciary under Sections 404 and 409 of ERISA, 29 U.S.C. §§ 1104, 1109(a). The district court’s decision in Galgay is instructive. There, the court dismissed the plaintiff 3 The remaining cases cited in Defendants’ brief support the Funds’ ERISA breach of fiduciary duty claims against Leone. See e.g. Nelson v. Jones & Brons, Inc., 2002 WL 31081363 (W.D. Pa. 2002) (recognizing that a corporate officer can be held liable for an employer’s fringe benefit contributions when the corporate officer acts in the capacity of a fiduciary for purposes of ERISA); Confer v. Custom Eng. Co., 952 F.2d 34 (3d Cir. 1991) (holding that corporate officers may assume fiduciary status and fiduciary liabilities under ERISA, even absent designation as named fiduciaries, by performing functions that fulfill the ERISA definition of fiduciary); Srein v. Frankford Trust Co., 323 F.3d 214 (3d Cir. 2003) (holding that fiduciary status attaches to a person managing an ERISA plan if that person exercises discretion in the management of the plan, or if the person exercises any authority or control over the management or disposition of the plan’s assets); Glaziers and Glassworks Union Local No. 252 Annuity Fund v. Newbridge Securities, Inc., 93 F.3d 1171 (3d Cir. 1996) (same); Board of Trustees of Bricklayers and Allied Craftsman Local 6 v. Wettlin Assoc. Inc., 237 F.3d 270 (3d Cir. 2001) (same). 4 ERISA provides: “Every employer who is obligated to make contributions to a multi-employer plan under the terms of a collectively bargained agreement, shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.” 29 U.S.C. § 1145 (emphasis added). Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 10 of 11 11 benefit funds’ claim that a corporate officer was liable for unpaid contributions on the basis the officer was an “employer” as defined by ERISA in Section 515, 29 U.S.C. § 1145. Galgay, 677 F. Supp. at 297. This was the same claim that the courts rejected in Solomon, Amalgamated Cotton, Combs, and Conners. See supra. However, tellingly, the court in Galgay proceeded to uphold a separate claim advanced by the plaintiff benefit funds that the corporate officer was liable for unpaid contributions as a fiduciary under Section 404 and 409 of ERISA, 29 U.S.C. §§ 1104, 1109(a). Id. at 301. The court in Galgay did not require the plaintiff benefit funds to assert facts warranting the piercing of the corporate veil in order to hold corporate officers personally liable under Section 404 and 409 of ERISA. Indeed, no court has required corporate veil piercing in order to hold an ERISA fiduciary liable for breach of his or her fiduciary duties. As outlined above, Leone is an ERISA fiduciary by virtue of exercising discretionary control over the plan assets and is therefore personally liable for Molinaro’s delinquent fringe benefit contributions to the Funds. IV. CONCLUSION Defendants fail to raise a single issue of material fact and they are unable to demonstrate that as a matter of law Plaintiff Funds are not entitled to relief. Therefore, this Honorable Court should grant summary judgments in favor of the Plaintiff Funds and against Defendants Molinaro (Count I) and Leone (Counts II and III). Respectfully submitted, TUCKER ARENSBERG, P.C. /s/ Jeffrey J. Leech Jeffrey J. Leech, Esquire PA I.D. #19814 William P. Lewis, Esquire PA I.D. #316527 1500 One PPG Place Pittsburgh, PA 15222 (412) 566-1212; Fax (412) 594-5619 Attorneys for Plaintiffs LIT:609507-1 024112-170307 Case 2:15-cv-01455-DSC Document 23 Filed 08/01/16 Page 11 of 11