Eighth Circuit Affirms Award of Delinquent Contributions and Attorney’s Fees to Trustees of Five Multi-Employer Fringe Benefit Funds

In Nesse as Trustees of Minnesota Laborers Health & Welfare Fund v. Green Nature-Cycle, LLC, No. 20-2365, __F.4th__, 2021 WL 3412123 (8th Cir. Aug. 5, 2021), Plaintiffs are trustees of five multi-employer fringe benefit funds (“Trustees”) who sued Green Nature-Cycle, LLC under ERISA § 515 and LMRA § 301 for delinquent contributions, interest, costs, and attorney’s fees. The Eighth Circuit affirmed the district court’s grant of summary judgment to the Trustees, which included an attorney’s fee award of about $66,000.

The relevant facts are as follows. Green Nature, a seasonal landscaping business, served as a subcontractor for Minnesota Department of Transportation (MnDOT) landscaping projects for several months in 2017. Green Nature was required to sign a CBA that required it to contribute to the five Funds on behalf of all covered Employees. The CBA does not define the term Employees, but it applies to all Landscape Work conducted in Minnesota and it contains a “recognition clause” whereby Green Nature recognizes the Union as the exclusive representative of all Employees performing work within the jurisdiction of the Union for the purpose of collective bargaining with respect to fringe benefits, hours of employment and other conditions of employment. The CBA also requires each Employee covered by the CBA to become a union member within eight days of employment. Additionally, Green Nature must contribute fringe benefits monthly for each hour worked by all Employees covered by the CBA and to pay wage rates and benefits for all covered Employees regardless of whether the Employees are members of the Union.

Following a complaint made by Green Nature employees, an MnDOT labor compliance investigator, Jacquelyn Klein, determined that Green Nature did not pay its union and non-union employees wages and fringe benefits as required by Minnesota prevailing wage laws. Green Nature refused to pay so Klein ordered the general contractor to pay the employees their delinquent wages and fringe benefits. The general contractor sent a check to the Funds for monies owed to union employees and sent money owed to non-union employees to Klein, who sent the money directly to the non-union employees. Notably, as part of the investigation, Klein did not review the CBA. Subsequently, the Trustees attempted a CBA-authorized audit of Green Nature, but Green Nature did not cooperate. This lawsuit followed.

Green Nature argued that the CBA did not require it to contribute fringe benefits for non-union employees, and even if it did, an award of delinquent contributions would cause it to double pay for the contributions received by the general contractor from the MnDOT audit. In the alternative, Green Nature argued that the MnDOT audit collaterally estops the Trustees from relitigating the amount of fringe benefits owed for non-union employees. The Eighth Circuit disagreed.

First, the court determined that the CBA unambiguously required Green Nature to contribute to the Funds for non-union employees. The court explained, “Articles 5.2 and 16.5(i) indicate that fringe benefit contributions are required regardless of union membership. And the phrase ‘regardless of whether or not such Employees are members of the Union’ in Articles 5.2 and 16.5(i) indicates that ‘Employee’ is not synonymous with ‘union member.’” The court also noted that the Fourth, Sixth, Ninth, and Tenth circuits have found that a CBA’s designation of a union as “the exclusive bargaining agent for all employees indicates that fringe benefit contributions are required for both union and nonunion members.” The court also determined that because the CBA is unambiguous, the district court did not err by excluding extrinsic evidence of “industrial common law” showing industry practice is for non-union employees to be paid fringe benefits directly.

Second, the court disagreed with Green Nature that an award of delinquent contributions would result in the Trustees receiving duplicate fringe contributions. Green Nature did not pay anything to the Funds for the fringe benefits for its non-union employees. The court was also unpersuaded by the argument that the Funds would receive a windfall because they do not pay fringe benefits for non-union employees. The court explained that Green Nature’s failure to contribute to the Funds reduces the total contributions (and investment income) available to pay benefits for all employees covered by the Funds. The Funds were “deprived of bargained-for monies that could have earned interest and been paid out as (higher) dividends to other employee beneficiaries.” Lastly, the evidence does not show that non-union employees are ineligible for the fringe benefits.

Third, the court determined that the MnDOT audit does not collaterally estop the Trustees from seeking delinquent fringe contributions for Green Nature’ non-union employees. The court declined to decide whether issue preclusion could ever be a valid defense to a collection action because the substantive elements of issue preclusion are not satisfied here. The audit addressed whether Green Nature owed its employees wages and benefits under Minnesota prevailing wage laws and did not address whether the CBA, under federal law, requires Green Nature to make fringe benefit contributions for non-union employees. Additionally, the Trustees were not parties or in privity with any parties to the audit.

Lastly, the court found that the district court did not abuse its discretion in awarding the Trustees attorney’s fees under ERISA § 502(g). Green Nature claimed the Trustees only achieved “partial success” because they were awarded only 80% of the amount they originally sought. The court noted that it has affirmed a fee award where the plaintiff received less than one-tenth of the amount requested because she recovered substantial damages and some of the benefit sought by the lawsuit.