Wisconsin Masons Health Care Fund v. Sid's Sealants, LLC
3:17-cv-00028
W.D. Wis.Aug 31, 2017Background
- Plaintiffs are multiple labor unions, multiemployer benefit funds, and trustees who sued Sid’s Sealants, LLC and its owner Sidney Arthur under ERISA and the LMRA, alleging defendants failed to remit required contributions and withheld union dues.
- Defendants answered and asserted five counterclaims: conversion/civil theft, breach of fiduciary duty, demand for accounting (equitable relief), tortious interference with contract, and conspiracy to injure business reputation (Wis. Stat. § 134.01).
- Defendants concede Sid’s Sealants, LLC contracted and paid timely to the Laborers unions but deny any binding collective bargaining agreement with the Bricklayers unions; they claim many payments to plaintiffs were voluntary and exceed any legal obligation and total $561,122.60 since March 2012.
- Defendants allege plaintiffs or plaintiffs’ counsel misapplied or failed to credit those voluntary payments, assessed late fees/penalties improperly, delayed providing lien waivers to general contractors, and refused requests for an accounting—facts they say harmed their business and reputation.
- Plaintiffs moved to dismiss all five counterclaims under Fed. R. Civ. P. 12(b)(6); the court reviewed the counterclaims for the adequacy of pleaded facts under Twombly/Iqbal and relevant Wisconsin law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Conversion / Civil theft (Wis. Stat. § 943.20) | Payments were proper transfers to funds/agents; no conversion | Plaintiffs received and misapplied funds, thereby retaining defendants’ property and committing civil theft and conversion | Dismissed — transfers gave plaintiffs ownership/possession; no pleaded entrustment, deception, or retained property interest to support civil theft or conversion claims |
| Breach of fiduciary duty | Funds acted appropriately; no fiduciary duty to employer | Plaintiffs owed fiduciary duties in handling payments / accounting | Dismissed — defendants failed to plead special circumstances creating a fiduciary relationship and cannot assert ERISA fiduciary duties on behalf of employers |
| Demand for an accounting (equitable remedy) | Ordinary discovery suffices; no special equitable grounds | Need an accounting because payments and allocations are unclear and complex | Dismissed — no fiduciary relationship alleged and no showing accounts are so complex that discovery is inadequate |
| Tortious interference with contract | Providing lien waivers was routine; any delay justified | Plaintiffs’ lien-waiver policy and delays caused general contractors to withhold payments, impairing contract value | Dismissed — defendants did not plead interference with a specific contractual right or show impairment of contract value from short delays |
| Conspiracy to injure business reputation (Wis. Stat. § 134.01) | Plaintiffs and counsel acted lawfully and not maliciously | Plaintiffs and counsel conspired to withhold waivers and with malice to damage business reputation | Dismissed — allegations are conclusory; no factual showing of an agreement or concerted acts by plaintiffs in furtherance of a malicious conspiracy |
Key Cases Cited
- Tamayo v. Blagojevich, 526 F.3d 1074 (7th Cir. 2008) (pleading standard and drawing inferences for Rule 12(b)(6) review)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard requires more than conclusions)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead factual matter plausibly suggesting entitlement to relief)
- Aslanukov v. Am. Express Travel Related Servs. Co., 426 F. Supp. 2d 888 (W.D. Wis. 2006) (distinguishing transfer of ownership from entrustment for civil-theft analysis)
- In re Disciplinary Proceedings Against Evans, 121 Wis. 2d 42 (Wis. 1984) (trustee/attorney conversion principles)
- Berner Cheese Corp. v. Krug, 312 Wis. 2d 251 (Wis. 2008) (elements for breach of fiduciary duty under Wisconsin law)
- Data Key Partners v. Permira Advisers LLC, 356 Wis. 2d 665 (Wis. 2014) (legal conclusions insufficient to plead fiduciary breach)
- Zastrow v. Journal Commc’ns, Inc., 291 Wis. 2d 426 (Wis. 2006) (fiduciary duty arises from a conscious undertaking of a special position)
- Virnich v. Vorwald, 664 F.3d 206 (7th Cir. 2011) (elements required to plead conspiracy to injure business reputation under Wisconsin law)