Case Information
*1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION
Trustees of Ohio Bricklayers )
Health and Welfare Fund, et al., ) CASE NO. 1:17 CV 437
) Plaintiffs, ) JUDGE PATRICIA A. GAUGHAN )
vs. )
)
VIP Rеstoration, Inc., et al., ) ) MEMORANDUM OF OPINION ) AND ORDER
Defendants. )
INTRODUCTION
This matter is before the Court upon Plaintiffs’ Motion for Summary Judgment against Defendant Rick Semersky. (Doc. 15). The motion is unopposed. This is an ERISA case. For the reasons that follow, the motion is GRANTED.
FACTS
Plaintiffs are Trustees of the following funds: the Ohio Bricklayers Health and Welfare Fund, the Bricklayers and Trowel Trades International Pension Fund, the International Masonry Institute, the Bricklayers and Allied Craftworkers Local No. 55 Pension Fund, and the *2 Bricklayers and Allied Craftworkers Local No. 7 Pension Fund (together, the “Funds”). Plaintiffs bring this lawsuit against Defendants VIP Restoration, Inc. (“VIP”) and its president, Rick Semersky, Jr., alleging claims for breach of collective bargaining agreements, breach of fiduciary duty, and violation of the Employee Retirement Income Security Act of 1974 (“ERISA”).
The Funds are multi-employer plans, which are maintained pursuant to collective bargaining agreements (“CBAs”) between VIP and Local Unions Nos. 5, 7, 8, 16 and 55 (“Local Unions”). (Docs. 1 and 5 ¶¶ 3, 10). It is undisputed that the Funds are trust funds that were establishеd for the purpose of providing health care, pension, and related benefits for participants and their dependents. (Docs. 1 and 5 ¶ 3; Doc. 15-6 ¶ 2).
The CBAs require VIP to pay contributions to the Funds for work done in the geographic jurisdiction of the Local Unions. (Docs. 1 and 5 ¶¶ 12, 13). Pursuant to the CBAs, VIP also agrees to submit timely and accurate monthly reports to the Funds with respect to all employees performing covered work and to make contributions to the Funds. Id. at ¶ 14. The CBAs require VIP to submit to audits by the Funds to determine that the contributions had been made in accordance with the parties’ agreements. Id. at ¶ 11. The terms of the CBAs provide that when VIP fаils to make timely contributions to the Funds, it is required to pay a penalty, including but not limited to interest and liquidated damages. (Doc. 1-3, PageID# 116; Doc. 1-4, PageID# 137; Doc. 1-5, PageID# 189-190; Doc. 1-7, Page ID#256-57; Doc. 1-8, PageID# 284-85).
Semersky is the president, owner, and principal officer of VIP. (Docs. 1 and 5 ¶¶ 6, 27). He admits to being a fiduciary under ERISA. Id. at ¶ 6. He is the only persоn with authority to sign checks at VIP, and he had the final say over which VIP bills were paid. (Doc. 15-11, *3 PageID# 767; Doc. 15-12, PAGEID#851).
Semersky also owned other companies, and admitted in his deposition that he used monies from the VIP bank account for the benefit of himself and his other companies. (Doc. 15- 17, PAGEID#794-800). For example, VIP paid for the liquor permit for one of Semersky’s restaurants. Id. at 799-800. VIP paid for a consultant and other individuals who did work for Semersky’s other companies. Id. at 794, 800. VIP also paid for Semersky’s Shoreby Club membership. Id. at 795. VIP repeatedly transferred money to Semersky’s other restaurants. Id. at 797-98. Meanwhile, VIP did not stay current with the contributions that it owed to the Funds. ( See Doc. 15-6 ¶ 5).
The Funds retained an auditor to review the books and records of VIP and determine whether VIP had paid contributions on all work covered by the CBAs during the period January 1, 2012 through September 30, 2016. (Doc. 15-1 ¶ 1). Larry Brown, CPA, conducted the audit. Id. at ¶¶ 1-2. Auditor Brown determined that VIP failed to pay contributions in a timely manner, and, therefore, accrued interest and liquidаted damages. Id. ¶ 5. Further, VIP frequently paid contributions late. Funds Administrator Kimberly Wood and Executive Director David F. Stupar calculated the additional interest and liquidated damages associated with VIP’s late payments. (Doc. 15-6; Doc. 15-15).
VIP went into receivership in September 2017. (Doc. 11-1). Documents produced by VIP demonstrate that the funds loaned to Semersky’s other businesses by VIP totaled $2,436,335.20 at that time. (Doc. 15-13).
Thereafter, Plaintiffs filed this lawsuit asserting three claims for relief. Count one is a claim for breach of the CBAs between the parties. Count two is a claim for breach of fiduciary *4 duty. Count three is a claim for prohibited transactions under ERISA. When VIP went into receivership, it moved to stay the case. The Court granted that stay as to VIP only, and allowed the case to continue as to Semersky. Plaintiffs move for summary judgment with respect to Counts 2 and 3 against Semersky. Semersky is not a party to Count 1, and Plaintiffs have not moved on that Count. Semersky has not opposed the motion.
STANDARD OF REVIEW
Summаry judgment is appropriate when no genuine issues of material fact exist and the
moving party is entitled to judgment as a matter of law.
Celotex Corp. v. Catrett
,
[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the bаsis for its motion, and identifying those portions of “the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits,” if any, which it believes demonstrates the absence of a genuine issue of material fact.
Celotex
,
The evidence, all facts, and any inferences that may permissibly be drawn from the facts
*5
must be viewed in the light most favorable to the nonmoving party.
Matsushita Elec. Indus. Co.
v. Zenith Radio Corp.
,
Summary judgment should be granted if a party who bears the burden of proof at trial
does not establish an essential element of his case.
Tolton v. American Biodyne, Inc.
, 48 F.3d
937, 941 (6th Cir. 1995) (citing
Celotex
,
ANALYSIS
A. Count Two (Breach of Fiduciary Duty)
Plaintiffs argue that Semersky breached his fiduciary duty to the Funds. In order to establish this claim, Plaintiffs must first show that Semerksy was a fiduciary to the Funds. Semersky admitted that he was a fiduciary in his Answer to Plaintiffs’ Complaint. (Docs. 1 and 5, ¶¶ 6, 38).
Further, Plaintiffs present sufficient evidence to establish that Semersky was a fiduciary.
The ERISA definition of fiduciary includes any person “who exercises any discretionary
authority or discretionary contrоl respecting management of such plan or exercises any authority
*6
or control respecting management or disposition of its assets.” 29 U.S.C. § 1002(21)(A).
Plaintiffs present evidence that Mr. Semersky exercised discretionary authority or control over
VIP’s finances.
See
Docs. 1, 5 ¶¶ 27-31 (Mr. Semersky owned VIP, had the authority to obligate
VIP, was thе principal officer responsible for VIP, and made the decisions about how VIP spent
its money.). Additionally, Plaintiffs demonstrate that VIP’s unpaid benefit contributions
constituted plan assets at the time they became due. Traditionally, “unpaid employer
contributions are not assets of a fund unless the agreement between the fund and the employer
specifically and clearly declares otherwise.”
Road Sprinkler Fitters Local Union No. 669, U.A.,
AFL-CIO, et al. v. Dorn Sprinkler Co., et al.,
Plaintiffs point to three applicable trust agreements which contain language sufficient to establish that unpaid contributions were plan assets at the time they became due:
! The Ohio Bricklayers Health & Welfare Trust Fund Restated Agreement and Declaration of Trust, Amendment No. 3: “[C]ontributions or other monies received from or owing from an Employer and/or an individual(s) who has control over the payment of such contributions shall be deemed Trust Fund Assets.” (Doc. 15-9, PageID # 644-45).
! The Amended and Restated Agreement and Dеclaration of Trust of the Bricklayers & Trowel Trades International Pension Fund: “All moneys paid into and/or due and owing the Trust Fund, including but not limited to fringe benefits contributions due and owing to the Trust Fund, are plan assets and title to all such monies shall be vested in and remain exclusively in the Trustees of the Fund.” (Doc. 15-17, PageID # 969).
! The Amended Agreement and Declaration of Trust Bricklayers Local No. 55 Health and Welfare Fund: “The Employer contributions to be paid into the Trust Fund shall not constitute or be deemed wages due to the Employees, and such contributions shall not in any manner be liable for nor subject to the debts, contracts or liabilities of the Employers, the Union or the Employees. However, contributions or other monies received from or owing from an Employer and/or an individual(s) who has control over the payment of such contributions shall be deemed Trust Fund assets.” (Doc. 15-10, PageID # 740).
*7 Based on the express language set forth in these agreements and the other evidenсe presented by Plaintiffs, the Court finds that Semersky was a fiduciary under ERISA.
As a fiduciary, Semersky had a responsibility to “discharge his duties with respect to a
plan solely in the interest of the participants and beneficiaries, and only for the purpose of
providing benefits to beneficiaries and covering administrative costs.”
Briscoe v. Preferred
Health Plan, Inc.,
Plaintiffs argue that Semersky should be held personally liable for the breach of his
fiduciary duty. Under ERISA § 1109, “[a]ny person who is a fiduciary with respect to a plan
who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this
subchapter 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;
see also Trustеes of Iron Workers’ Local No. 25
Pension Fund v. Mun. & Indus. Storage, Inc.,
Because Plaintiffs establish that there is no genuinе issue as to any material fact that Semersky was a fiduciary to the Funds and violated his fiduciary duties therein, they are entitled to summary judgment on Count Two.
B. Count Three (Prohibited Transactions under ERISA)
Plaintiffs argue that Semersky violated ERISA by permitting the diversion or lending of
employer contributions from the Funds for the benefit of a “party in interest.” Semersky
admitted to this allegation in his answer to Plaintiff’s complaint. (Docs. 1 and 5 ¶ 39).
Moreover, Plaintiffs present sufficient evidence to support their charge. ERISA specifically
prohibits certain types of transactions between plans and “parties in interest,” including the
“transfer to, or use by or for the benefit of, a party in interest, of any assets of the plan.” 29
U.S.C. § 1106(a)(1)(D). The term “party in interest” is defined as “any fiduciary, a person
providing services to the plan, an employer whose employees are covered by the plan, and
certain shareholders and relatives.”
Chao v. Hall Holding Co.,
As set forth above, there is no genuine issue of material fact that Semersky used plan assets for his own benefit by using VIP funds to support himself and his other businesses. For example, VIP paid for the liquor permit for one of Semersky’s restaurants (PAGEID# 799-800), a consultant and other individuals who did work for Semersky’s other companies (PAGEID# 794, 800), and Semersky’s Shoreby Club membership (PAGEID# 795). These transactions are *9 prohibited under ERISA. [1] Therefore, Plaintiffs are entitled to summary judgment against Semersky on Count Three.
C. Damages
Plaintiffs present audit reports and calculations by the Fund Administrator to
establish the amount of damages owed by Semersky. The Sixth Circuit has affirmed awards of
delinquеnt contributions based on auditors’ reports where employers failed to offer sufficient
evidence in rebuttal.
Trs. of the Painters Union Deposit Fund v. Ybarra Constr. Co.,
2004 WL
2334145 (6th Cir. 2004) (rejecting the use of an unsworn statement and deposition testimony to
challenge an auditor’s calculation of damages);
Trs. of Detroit Carpenters Health & Welfare
Fund v. River City Constr. Co.,
Through the audits, Plaintiffs demonstrate that there is no genuine issue of material fact that the Ohio Bricklayers Health and Welfare Fund (“Ohio Fund”) is entitled to $17,508.71, which represents the unpaid contributions through September 30, 2016, with interest, and liquidated damages calculated through December 31, 2017. (Doc. 15-1 ¶ 5). Additionally, the Ohio Fund is owed interest and liquidated damages on VIP’s late contributions during the period April 2015 through April 2017 in the amount of $31,538.22. (Doc. 15-6 ¶ 6). In total, Plaintiffs *10 show that Semersky owes the Ohio Fund $49,046.93, which reprеsents unpaid fringe benefit contributions found to be due and owing through September 30, 2016, and the liquidated damages and interest found to be due and owing through December 31, 2017. (Doc. 15-1 ¶ 5).
Plaintiffs also establish that there is no genuine issue of material fact that the Bricklayers and Trowel Trades International Pension Fund and International Masonry Institutе (“International Funds”) are entitled to $35,634.81, which represents the amount of delinquent contributions through September 30, 2016, with interest, and liquidated damages calculated through December 31, 2017. (Doc. 15-1 ¶ 5). In addition, Plaintiffs show that the International Funds are entitled to an additional $31,292.93 in delinquent contributions, interest, liquidated damages and costs. (Doc. 15-15 ¶ 20). Plаintiffs, therefore, sufficiently establish that the International Funds are owed a total of $66,927.74, which represents the total unpaid fringe benefit contributions found to be doing and owing through September 30, 2017, and the liquidated damages and interest found to be due and owing through December 18, 2017.
Finally, Plaintiffs demonstrate that there is no genuine issue of mаterial fact that the Bricklayers and Allied Craftworkers Local No. 55 Pension Fund and Bricklayers and Allied Craftworkers Local No. 55 Voluntary Employees Beneficiary Association are entitled to $25,186.03, which represents unpaid fringe benefit contributions found to be due and owing through December 31, 2017. (Doc. 15-1, ¶ 5).
Plaintiffs argue that they arе also entitled to attorneys’ fees pursuant to the CBAs, the plan documents, and ERISA. 29 U.S.C. § 1132(g)(2) provides:
In any action under this subchapter by a fiduciary for or on behalf of a plan to enforce section 1145 of this title in which a judgment in favor of the plan is awarded, the court shall award the plan –
(A) the unpaid contributions, *11 (B) interest on the unpaid contributions,
(C) an amount equal to the greater of –
(i) interest on the unpaid contributions, or
(ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent . . . of the amount determined by the court under subparagraph (A),
(D) reasonable attorney’s fees and costs of the action, to be paid by the defendant, and
(E) such other legal or equitable relief as the court deems appropriate.
The Sixth Circuit has held that an award of reasonable attorneys’ fees under this section
is mandatory, not discretionary.
Trustees for Mich. Laborers Health Care Fund v. Eastern
Concrete Paving Co.,
CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion for Summary Judgment (Doc. 15) is GRANTED. The Court also grants Plaintiffs leave to file a properly supported motion for attorneys’ fees and costs within fourteen (14) days of the date of this Order.
IT IS SO ORDERED .
/s/ Patricia A. Gaughan PATRICIA A. GAUGHAN United States District Court Chief Judge
Dated: 2/16/18
Notes
[1] Plaintiffs also argue that it is undisputed that Semersky diverted plan assets for the benefit of VIP by paying VIP’s other creditors without paying the Funds from 2012 to present. However, Mr. Semersky denied this allegation in the Answer (Doc. 5, ¶ 32), and Plaintiffs have not pointed to any evidence substantiating this allegation.