LABORERS’ PENSION FUND, Laborers’ Welfare Fund of the Health and Welfare Department of the Construction and General Laborers’ District Council of Chicago and Vicinity and James S. Jorgensen, Plaintiffs-Appellants, v. A & C ENVIRONMENTAL, INCORPORATED, and Bryon Clark, individually and doing business as A & C Environmental, Incorporated, Defendants-Appellees.
No. 01-1622.
United States Court of Appeals, Seventh Circuit.
Decided Aug. 19, 2002.
302 F.3d 768
III.
For the reasons stated herein, we affirm the decision of the district court.
John A. Simon (argued), Gardner, Carton & Douglas, Chicago, IL, for Defendants-Appellees.
Before COFFEY, RIPPLE and DIANE P. WOOD, Circuit Judges.
RIPPLE, Circuit Judge.
The Laborers’ Pension Fund and the Laborers’ Welfare Fund of the Health and Welfare Department of the Construction and General Laborers’ District Council of Chicago and Vicinity and the Funds’ administrator, James Jorgensen, (collectively, “the Funds“) brought this action under ERISA section 515,
I
BACKGROUND
A. Facts
A & C is a corporation specializing in the transportation and disposal of hazardous and nonhazardous waste. In April 1999, Kopper‘s Industries asked A & C to
Mr. Frattini assured Mr. Clark that Local 75 could cover his Gary employees and would not have to cover A & C‘s other employees. Mr. Clark testified that he “had quite a bit of concern” because he knew “if someone goes union, you know, it covers all their company operations.” Tr.V at 187. He also testified that Mr. Frattini responded to his concerns: “Well, the union doesn‘t operate like that anymore. We‘re here to make money just like you.” Id. Mr. Frattini subsequently met with Mr. Clark, Carl Grad (President of A & C) and Tom Grad (A & C‘s director of transportation) and made the same assurances. Mr. Frattini also met with Mr. Clark at A & C‘s offices to register the Gary employees with the Union. At the meeting, Mr. Frattini and Mr. Clark answered the questions of the Gary employees. While they were answering the questions, Mr. Frattini gave Mr. Clark a one page document and showed him where to sign.2 The document featured the heading “Collective Bargaining Agreement,” centered and in capital letters, and Mr. Clark filled in “A & C Environmental Inc.” on a line directly below the heading. App. of Appellants at 129. Nevertheless, Mr. Clark testified that he did not know he was signing a collective bargaining agreement (“CBA“). Mr. Clark believed the document reflected Mr. Frattini‘s assurances that the Union would only represent the Gary employees. Mr. Clark further testified that he did not have an opportunity to read the document because Mr. Frattini took it from him as soon as he had finished signing. Although his offices had a copy machine, Mr. Clark did not make a copy of the document because he was busy answering his employees’ questions, and he “trusted Mr. Frattini‘s word.” Tr.V at 201.
The CBA that Mr. Clark signed states that A & C “affirms and adopts the Collective Bargaining Agreements between the UNION and ... the Illinois Environmental Contractors Association,” and that A & C “agrees to pay the amounts that it is bound to pay under said Collective Bargaining Agreements to the HEALTH AND WELFARE DEPARTMENT OF THE CONSTRUCTION AND GENERAL LABORERS’ DISTRICT COUNCIL OF CHICAGO AND VICINITY [and] the LABORERS’ PENSION FUND ....” App. of Appellants at 129. The Union has a CBA, the “Asbestos Agreement,” with the Illinois Environmental Contractors Association. See App. of Appellants at 132. That agreement, as well as the one page CBA that Mr. Clark signed, require the employer—A & C, once it signed on—to
B. District Court Proceedings
The Funds brought suit against A & C and Mr. Clark to recover the delinquent contributions and hired an auditing firm to determine how much A & C owed. Count I of the Funds’ complaint sought recovery of the contributions that A & C owed the Funds. In Count II, the Funds—as the designated collection agents of the Union—sought to recover the dues that A & C owed the Union.
The following details of the proceedings before the district court are relevant to the determination of whether the Funds’ claims on appeal are procedurally barred.
The Funds timely filed a motion for summary judgment. In that motion, it submitted that ERISA entitles the Funds to accept a contract between employers and unions without regard to any oral understandings between employers and unions that conflict with the contract‘s terms. The court, for reasons undisclosed by the record, declined to rule on the motion. The Funds thereafter filed a motion to convert the summary judgment motion into a motion in limine to exclude evidence relating to any contract formation defense or defenses based on oral side agreements between A & C and the Union. The court denied the motion. The Funds then filed a motion in limine, accompanied by a supporting brief, in which they again requested exclusion of any evidence relating to side agreements. They submitted that our opinion in Central States, Southeast & Southwest Areas Pension Fund v. Gerber Truck Service, Inc., 870 F.2d 1148 (7th Cir.1989) (en banc), rendered irrelevant any evidence relating to the existence of oral understandings between A & C and the Union that modified the terms of the CBA. In their reply brief to A & C‘s response to their motion in limine, the Funds specifically contended that Gerber Truck foreclosed the defenses of fraud in the inducement and fraud in the execution and that, even if fraud in the execution remained a viable defense to a pension fund‘s efforts to collect delinquent contributions, A & C had not made out the defense. The district court ultimately granted the motion in limine to exclude evidence relating to the defense of fraud in the inducement,3 but not evidence relating
At trial, A & C presented its defense of fraud in the execution, seeking to prove that Mr. Clark had not known that the contract he signed with the Union obligated A & C to make contributions to the Funds and that his ignorance was excusable.
After A & C closed its case, the court heard motions by counsel. The attorney for the Funds announced that they had two motions to make and proceeded to explain the first, a motion for leave to amend the complaint to conform to the evidence. After hearing arguments from counsel, the district court denied it and then added: “The motion for a directed finding or a directed verdict is also denied.” Tr.VI at 328. Counsel for the Funds asked if he could “make a record with respect to that second motion,” id., and the court invited the Funds to file something if they wanted. The court made clear, however, that it was going to submit the case to the jury whether or not the Funds filed additional material. After this colloquy, the Funds put on rebuttal evidence, which consisted exclusively of a very brief examination of Mr. Clark. At the end of the examination, the Funds voluntarily dismissed Mr. Clark from the suit.
The jury found for A & C on both counts, and the district court entered judgment on the verdict.4 The court denied the Funds’ post-trial motion for judgment as a matter of law (“JMOL“) and motion for a new trial in which the Funds argued that fraud in the execution was not a viable defense to the Funds’ claim for delinquent contributions and that, even if it was, the
II
DISCUSSION
The Funds submit on appeal, as they did before the district court, that fraud in the execution is not a viable defense to a pension fund‘s efforts to collect delinquent contributions. They further submit that, even if fraud in the execution is a permissible defense, A & C did not establish that defense at trial. In their view, the district court should have granted their post-trial motion for judgment as a matter of law. Before we can reach the merits of this argument, however, we must address whether this post-trial motion for judgment as a matter of law was preceded by a motion for judgment as a matter of law at the close of all the evidence.
A. The Rule 50 Motion
The language of Rule 50 suggests that only a motion for JMOL that is made at the close of all the evidence may be renewed post trial. See
As we noted in Downes v. Volkswagen of America, Inc., 41 F.3d 1132 (7th Cir.1994): “In the past, this and other courts have not applied this rule rigidly, especially where a directed verdict motion was made at the close of the plaintiff‘s case and no prejudice has resulted to the nonmoving party from the failure to renew.” Id. at 1139; see Umpleby v. Potter & Brumfield, Inc., 69 F.3d 209, 212 (7th Cir.1995) (same). Downes also observed, however, that the Advisory Committee had reevaluated and amended the Rule in 1991 and “deliberately ‘retained the requirement that a motion for judgment be made prior to the close of the trial, subject to renewal after a jury verdict has been rendered.‘” Downes, 41 F.3d at 1139 (quoting
We reaffirmed Downes’ strict application of the Rule 50 requirement in Umpleby and again in Mid-America Tablewares, Inc. v. Mogi Trading Co., Ltd., 100 F.3d 1353 (7th Cir.1996), when the defendants had moved for JMOL after the plaintiffs’ cases but had failed to renew their motions after all the evidence had been presented. See Umpleby, 69 F.3d at 212; Mogi Trading, 100 F.3d at 1364. When a defendant moves unsuccessfully for JMOL at the close of the plaintiff‘s case but does not renew the motion after it has put on its own case, the plaintiff reasonably “may assume that the denial was the end of the matter,” Szmaj, 291 F.3d at 958, and so will not be alerted to the necessity of curing any defect in its case before the jury retires. This situation was the case in both Umpleby and Mogi Trading,6 and so a strict application of the Rule 50 requirement well served the purpose of the Rule. Here, by contrast, the Funds made their motion—or, more precisely, the district court anticipated their motion and preemptively denied it—after both parties had put on their cases, but before the Funds put on their brief rebuttal evidence.
A & C points to only one case in which we have applied the Rule 50 requirement to block a party‘s motion for JMOL that had been made after both parties had put on their evidence but not renewed after one of the parties put on rebuttal evidence. See E. Natural Gas Corp. v. Aluminum Co. of Am., (ALCOA), 126 F.3d 996, 1000 (7th Cir.1997). There, however, the moving party had chosen not to take the position on appeal that the denial of its post-trial motion for JMOL had been improper; it conceded at oral argument that Umpleby applied. Because the party admitted that it failed to preserve the Rule 50 argument, see id., the court did not have occasion to examine the issue. Nor is there any indication in ALCOA of the amount of rebuttal evidence that was offered. Here, however, the rebuttal evidence consisted only of a very brief examination of Mr. Clark and primarily concerned his personal liability, a matter rendered moot when the Funds voluntarily dismissed him as a defendant immediately after his testimony.7 Furthermore, as a practical matter, the Funds had no realistic opportunity to raise the motion for judgment as a matter of law after the brief rebuttal testimony of Mr. Clark. The district court already had taken the matter under advisement and made crystal clear to the parties that it did not wish to hear further on the matter prior to the case‘s being given to the jury. Under these circumstances, counsel can hardly be expected to have asked that the matter be
A & C also submits that the Funds’ pre-verdict motion for JMOL did not preserve its arguments because the motion was not sufficiently specific. Rule 50(a) requires pre-verdict motions for JMOL to “specify the judgment sought and the law and the facts on which the moving party is entitled to the judgment.”
A & C submits that this court‘s opinion in EEOC v. AIC Security Investigations, Ltd., 55 F.3d 1276 (7th Cir.1995), signaled an end to our previously lenient application of the rule by which we “allowed something other than a motion for a directed verdict at the close of evidence to preserve the objection.” Id. at 1286. We note, however, that Urso, cited above, was decided several months after our opinion in AIC Security. Nevertheless, in both AIC Security and the lenient case whose result the Advisory Committee intended to alter with its 1991 amendment to Rule 50, Benson v. Allphin, 786 F.2d 268 (7th Cir.1986); see
B. Claims for Delinquent Contributions and Dues
1.
The Funds submit that fraud in the execution is not a valid defense to a multiemployer pension plan‘s efforts to collect on delinquent contributions. ERISA section 515, which the Funds seek to enforce, provides:
Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or 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.
ERISA § 515,
We therefore concluded in Gerber Truck that, with respect to documents in which employers promise to make contributions to pension funds on behalf of their employees, section 515 allows pension funds to enforce the writings according to their terms “without regard to understandings or defenses applicable to the original parties [the employer and the union].” Gerber Truck, 870 F.2d at 1149. That is, where, as here, an employer has signed a CBA in which it promises to contribute to a pension fund, the “pension fund‘s reliance upon the terms of the CBA may not be thwarted ... by defenses that may
If the employer simply points to a defect in [the contract‘s] formation—such as fraud in the inducement, oral promises to disregard the text, or the lack of majority support for the union and the consequent ineffectiveness of the pact under labor law—it must still keep its promise to the pension plans.
Anything less may well saddle the plans with unfunded obligations.
Gerber Truck, 870 F.2d at 1153.
As we concluded in Gerber Truck, section 515 clearly forecloses the defense of fraud in the inducement. A & C submits, however, that Gerber Truck does not foreclose the defense of fraud in the execution. “Fraud in the inducement” occurs when fraud induces a party to assent to a commitment that the party understands but to which the party would not otherwise have assented; the promisor knows what it is signing but its assent is induced by fraud. “Fraud in the execution,” by contrast, entails deceiving a party to an agreement as to the very nature of the instrument it signs so that the party “actually does not know what he is signing, or does not intend to enter into a contract at all.” Rosenthal v. Great Western Fin. Sec. Corp., 14 Cal.4th 394, 58 Cal.Rptr.2d 875, 926 P.2d 1061 (Cal.1996); see Southwest Adm‘rs, Inc. v. Rozay‘s Transfer, 791 F.2d 769, 774 (9th Cir.1986); 12 Williston on Contracts § 1488, at 332 (3d ed.1970). “Fraud in the execution results in the agreement being void ab initio, whereas fraud in the inducement makes the transaction merely voidable.” Rozay‘s Transfer, 791 F.2d at 774; see Rosenthal, 926 P.2d at 1076; 12 Williston on Contracts § 1488, at 332.
Several circuits have recognized fraud in the execution as a viable defense to suits by funds to collect delinquent contributions under ERISA because fraud in the execution renders the collective bargaining agreement void rather than merely voidable. See Louisiana Bricklayers & Trowel Trades Pension Fund & Welfare Fund v. Alfred Miller Gen. Masonry Contracting Co., 157 F.3d 404, 408 (5th Cir. 1998); Agathos v. Starlite Motel, 977 F.2d 1500, 1505 (3d Cir.1992); Benson v. Brower‘s Moving & Storage, Inc., 907 F.2d 310, 314 (2d Cir.1990); Rozay‘s Transfer, 791 F.2d at 774. The distinction between void and voidable contracts and a fund‘s ability to enforce a contract makes sense, because when a contract is void, it is as if it never existed. See Operating Eng‘rs Pension Trust v. Gilliam, 737 F.2d 1501, 1505 (9th Cir.1984) (where employer‘s signature on CBA is procured by fraud in the execution, it is as though “no collective bargaining agreement exists“).
Where a person is fraudulently induced to sign or endorse a bill or note in the reasonable belief that he is signing something else, he cannot really be said to have made or indorsed the bill or note; hence the ancient plea of non est factum is applicable. He is in effect stating that this is not his contract; in fact, it is not a contract at all. 12 Williston on Contracts § 1488, at 333.
A promisor‘s signature procured by fraud in the execution gives no more effect to a contract than a promisor‘s signature that has been forged. In either case the contract is void; it has never had any legal effect. See Andrews v. Tallman, 47 R.I. 111, 131 A. 50, 51 (R.I.1925) (“[U]nder the plea of non est factum [a defendant] may be entitled to prove fraud in the execution of the bond whereby the instrument never had a legal existence as in cases of forgery ....“); Crocker v. Bellangee, 6 Wis. 645, 1858 WL 2281, at 11 (Wis.1858)
This principle is consistent with our observation in Gerber Truck that “[t]he pension or welfare fund is like a holder in due course in commercial law, ... entitled to enforce the writing without regard to understandings or defenses applicable to the original parties.” Gerber Truck, 870 F.2d at 1149. Fraud in the execution is a viable defense to collection efforts by a holder in due course. See
2.
Although fraud in the execution is a viable defense under ERISA section 515, A & C has not made out the defense. In order to establish the defense of fraud in the execution, A & C had to prove that it did not know that it was signing a collective bargaining agreement that obligated it to make contributions to the Funds and that its ignorance was excusable because it had reasonably relied upon the representations of the union representative. See Ill. Conf. of Teamsters & Employers Welfare Fund v. Steve Gilbert Trucking, 71 F.3d 1361, 1365-66 (7th Cir.1995); Rozay’s Transfer, 791 F.2d at 774; see also
A & C submits that the Ninth Circuit found fraud in the execution under what it believes are very similar circumstances. In Gilliam, an owner-operator of a construction company, Gilliam, wanted to join the union so that he could operate his bulldozer on a job on which the workers were unionized. See 737 F.2d at 1502-03. The union representative gave Gilliam several documents to sign and represented that they were standard owner-operator forms for becoming a member of the union. See id. at 1504. In fact, however, the documents contained a collective bargaining agreement that obligated his company to make pension fund contributions for its workers. Gilliam did not read the documents, but merely relied on the union representative‘s word. The Ninth Circuit concluded that no binding agreement was created because Gilliam did not know what he signed and his ignorance was reasonable. See id. at 1505.
Here, Mr. Clark signed a one-page document written in English and entitled “Collective Bargaining Agreement.” A & C maintains that Mr. Clark did not know what a collective bargaining agreement was; he should have found out. See Paper Express, Ltd. v. Pfankuch Maschinen, 972 F.2d 753, 757 (7th Cir.1992) (“[E]ven though Paper Express may not be fluent in German, we are confident that with the aid of a German-English dictionary, or, even better, a translator, Paper Express could have mastered the rules of [the forum selection clause].“). A & C insists that Mr. Clark did not understand that the contract would require the company to contribute to the pension funds; if he had reviewed the single page he would have learned that it did. In short, Mr. Clark‘s ignorance of the nature of the contract was not excusable. Thus, as a matter of law, A & C did not prove fraud in the execution; it simply has failed to show that there was any reasonable basis for Mr. Clark‘s reliance on the earlier representations of the union representative.
A & C also submits that the jury reasonably could have concluded that A & C‘s employees had not performed work covered by the Asbestos Agreement. We disagree. Paragraph 4(a) of the Asbestos Agreement, entitled “Scope of Work,” provides that the “branches of work covered by this Agreement” include “the handling, removal, abatement, or encapsulation of asbestos and/or toxic or hazardous waste or materials.” App. of Appellants at 152. Covered work further includes “the operation of all tools and equipment: including, but not limited to, generators, compressors, and vacuums used in the removal and abatement of toxic or hazardous waste or materials,” and “all other work incidental to the handling, removal, control, abatement, disposal and/or encapsulation of asbestos and/or toxic or hazardous waste or materials.” Id. Paragraph 4(b) defines hazardous waste duties to include “over-packing ... and general clean-up of leaked materials or chemicals....” Id. Although Mr. Clark testified that A & C has never employed asbestos laborers, he also testified that A & C employees handle hazardous materials, that they have done over-packing,9 that they have cleaned spilled materials off of floors and that they use air compressors to clean walls, floors and vessels with a “CO2 blaster.” Tr.VI at 240.
Judgment as a matter of a law is appropriate on a particular issue if “there is no legally sufficient evidentiary basis for a reasonable jury to find for [the non-moving] party on that issue ....”
With respect to the delinquent union dues, A & C does not challenge the evidence showing that the CBA obligated it to remit dues to the Union, that A & C failed to do so, and that the Funds have authority to collect the delinquent dues. Therefore, because A & C has not controverted the evidence establishing its liability to pay contributions and union dues, and, because it cannot prove the defense of fraud in the execution, the Funds were entitled to judgment as a matter of law on both claims.
4.
The Funds submit that they are entitled to judgment not only on the question of A & C‘s liability but on the amount of damages as well. According to the Funds, the auditor‘s report detailing the amount of delinquent contributions that A & C owes is entitled to a presumption of correctness, which A & C has the burden to rebut, because A & C failed to maintain records adequate to establish the precise number of hours of covered work that its employees performed. The Funds rely on cases from three other circuits holding that if a pension or welfare fund has proven that an employer is liable for delinquent contributions, and the employer has failed to keep records that would allow the fund to calculate the precise amount of contributions owed, then the burden shifts to the employer to come forward with evidence of the precise amount of covered work (work
The records that employers are required to keep by ERISA may be the only evidence available to employees to prove that their employers have failed to compensate them in accordance with the statute. An employer cannot escape liability for his failure to pay his employees the wages and benefits due to them under the law by hiding behind his failure to keep records as statutorily required.
The rule prevents summary judgment against a fund when the fund is unable to prove damages with specificity because of the employer‘s failure to keep adequate records. We previously have held, however, that this rule does not apply to compel judgment against an employer when the employer raises a genuine issue of material fact as to the accuracy of the fund‘s calculation. See Illinois Conference of Teamsters and Employers Welfare Fund v. Steve Gilbert Trucking, 71 F.3d 1361, 1367 (7th Cir.1995) (employer‘s failure to come forward with documentary evidence establishing amount of covered work performed was not fatal in effort to oppose fund‘s motion for summary judgment when factual issues remained as to the amount owed).
Unlike the situation in Combs, Brick Masons and Grimaldi, the entirety of the award of contributions that the Funds seek is based on what the auditor determined to be covered work. Neither the Funds nor A & C claim that A & C‘s records were inadequate to allow the auditor to determine whether the hours included in the report were spent on covered work.10 Therefore, because A & C‘s records were adequate to permit the Funds’ auditors to determine the amount of covered work that A & C employees performed and based on which the Funds seek contributions, the Combs-Brick Masons burden-shifting rule does not apply.
Conclusion
Because A & C has not controverted the evidence establishing its liability to the Funds for the delinquent contributions and union dues, and because A & C did not prove the defense of fraud in the execution, the Funds are entitled to judgment as a matter of law. We therefore reverse the district court‘s denial of the Funds’ motion for judgment as a matter of law and remand the case to the district court for the determination of damages. The Funds may recover their costs of this appeal.
REVERSED AND REMANDED
RIPPLE
Circuit Judge