United States District Court, District of Columbia
SERVICE EMPLOYEES INTERNATIONAL UNION NATIONAL INDUSTRY PENSION FUND, et al., Plaintiffs,
HEBREW HOMES HEALTH NETWORK, INC., et al., Defendants.
N. McFADDEN, UNITED STATES DISTRICT JUDGE.
Service Employees International Union National Industry
Pension Fund (the "Fund") seeks to recover a total
of $847, 290.62 in required pension contributions that
Defendants Hebrew Homes Health Network, Inc., Aventura Plaza,
Inc., Jackson Plaza, Inc., Hebrew Homes Sinai, Inc., Arch
Plaza, Inc., Hebrew Homes South, Inc., and Hebrew Homes of
South Beach, Inc. (collectively, the "Employers")
admit that they failed to pay. The Court referred this matter
to Magistrate Judge G. Michael Harvey for full case
management, and following discovery, the parties filed
cross-motions for summary judgment. Upon consideration of the
Magistrate' Judge's Report and Recommendation (the
"Report"), R. & R., ECF No. 50, the Court
adopts the Report in full, over the Employers'
objections. The Court will deny the Employers' Motion for
Summary Judgment and grant in part and deny in part the
Fund's Cross-Motion for Summary Judgment.
Employers objected to the Report. See Objs. to R.
& R., ECF No. 52. The Court reviews de novo any
part of the Magistrate Judge's disposition a party
properly objects to. Fed.R.Civ.P. 72(b)(3). The Employers
mainly object to the Magistrate Judge's finding that
Amendment Three is a contractual limitations
period. The Employers' reasoning is far
from clear. They insist that the Court should consider
Amendment Three "to be an adoption of. . . the Florida
five-year statute of limitations." Objs. to R. & R.
at 19-20. Fine. But in that case, the Employers still lose
because, as the Report persuasively explains, the Fund's
Complaint was timely under Florida's statute of
Employers' real gripe is that, according to them,
Amendment Three was an unfair, unilateral "cram
down." But nowhere in their Objections do the Employers
argue that Amendment Three is therefore unenforceable or that
they are not bound by its terms. Nor could they. They did not
make that argument to the Magistrate Judge, see R.
& R. at 16, and parties may not present new issues or
arguments for the first time in their objections to the
Magistrate Judge's Report. See Sciacca v. FBI,
23 F.Supp.3d 17, 27 (D.D.C. 2014); Aikens v.
Shalala, 956 F.Supp. 14, 19-20 (D.D.C. 1997) (collecting
event, the Employers got what they bargained for. In each
Employer's negotiated Collective Bargaining Agreement
with the Fund, they agreed to be bound by Amendments adopted
by the Trustees, like Amendment Three. Indeed, the
Employers appear to concede that their obligation to abide by
the Trust Amendment is a product of their negotiations with
the Fund. See Objs. to R. & R. at 24 ("the
Plaza Facilities agreed in their CBAs to accept any changes
in the Plan"). More, rather than a unilateral "cram
down," Amendment Three was adopted by the Fund's
Board of Trustees, see ECF No. 39-1, which is
comprised of equal parts representatives from SEIU affiliated
labor unions and representatives from participating
employers, see SOF ¶ 2, ECF No. 36-16. Had they
objected to such a process, they should not have entered into
the Collective Bargaining Agreements. The Employers have
cited no authority that such Amendments passed by the
Fund's Trustees are defective. And again, they do not
make that argument. Thus, whatever unfairness the Employers
perceive, the Court agrees with . the Magistrate Judge that
Amendment Three is binding on the Employers.
Employers' other objections are arguments considered and
rejected by the Magistrate Judge. The Court has considered
the Employers' objections de novo. None has
merit for the reasons set forth in the Magistrate Judge's
thorough and well-reasoned Report. So the Court will adopt in
full the Magistrate Judge's Report as its own opinion and
append it below.
these reasons, the Court will deny the Employers' Motion
for Summary Judgment and grant in part and deny in part the
Fund's Cross-Motion for Summary Judgment. A separate
order will issue.
MICHAEL HARVEY, UNITED STATES MAGISTRATE JUDGE.
matter was referred to the undersigned for full case
management. Pending before the Court are the parties'
cross-motions for summary judgment. Service Employees
International Union National Industry Pension Fund ("the
Fund") and its Trustees (collectively
"Plaintiffs") filed this action under sections 502
and 515 of the Employee Retirement Income Security Act
("ERISA"), 29 U.S.C. §§ 1132, 1145,
against Hebrew Homes Health Network, Inc. and related
.corporations ("Defendants"). Plaintiffs seek to
recoup from Defendants pension contributions to the Fund
which Defendants failed to pay. Specifically, they seek $847,
290.62 in delinquent contributions, interest, liquidated
damages, fees, and costs, as well as declaratory and
injunctive relief. After reviewing the entire record,
the undersigned recommends denying Defendants' motion and
granting in part and denying in part Plaintiffs' motion.
do not dispute that they underreported and underpaid pension
contributions to the Fund between January 2009 and December
2010. Rather, they contend that Plaintiffs' claims to
recover those delinquent contributions are untimely.
Similarly, Defendants do not dispute the accuracy of
Plaintiffs' underpayment and related damages
calculations, except to contend that Plaintiffs have applied
incorrect employee eligibility criteria for contributions
that were due during a three-month period in 2010. The
factual background that follows will focus on these disputes.
Defendants' Collective Bargaining Agreements with Local
are a network of six residential nursing and rehabilitation
centers located in Miami-Dade County, Florida, and a
nonprofit corporation that "provid[es] administration
and support" to the centers. ECF No. 37-1 at 2-3. The
Fund is a multiemployer pension plan under ERISA that
provides pension benefits to eligible employees of
contributing employers. ECF No. 36-16 at 1-2; see
also 29 U.S.C. § 1002(37). The Fund is administered
in the District of Columbia by a board of trustees made up of
equal numbers of labor and management representatives. ECF
No. 36-16 at 1-2.
at Defendants' nursing and rehabilitation centers are
represented by Service Employees International Union Local
1199 United Healthcare Workers East ("Local 1199").
ECF No. 36-16 at 3. In October 2008, Defendants entered into
collective bargaining agreements ("CBAs") with
Local 1199 that established the terms and conditions of
employment for various covered classifications of employees.
ECF No. 36-16 at 3-6; ECF Nos. 36-1 through 36-6. These CBAs
were initially effective from the time that Local 1199's
members ratified the agreements through September 30, 2010.
the terms of the CBAs, Defendants agreed to become and remain
participating employers in the Fund "throughout the term
of th[e] Agreement[s], including any extensions
thereof." ECF Nos. 36-1 through 36-6 at ¶ 26.2.
Defendants agreed to make contributions on behalf of each
covered employee based on the number of hours each employee
worked. Id. at ¶ 26.3. The CBAs also required
each employer to submit a remittance report, including
information such as the employees' names and dates and
hours of employment, along with its contributions each month.
ECF No. 36-16 at 6-7; ECF Nos. 36-1 through 36-5, 36-6 at
¶ 26.3(c); ECF No. 36-15 at 6. As noted above,
Defendants do not dispute that between January 1, 2009 and
December 31, 2010, they underreported and underpaid their
contributions to the Fund.
Fund's Trust Agreement and Amendment Three
to the parties' dispute is whether Plaintiffs' claims
are governed by the statute of limitations period contained
in the parties' agreement. The CBAs between Defendants
and Local 1199 provide that each employer "agrees to be
bound by the provisions of the [Trust Agreement], as it may
from time to time be amended, and by all resolutions and
rules adopted by the Trustees pursuant to the powers
delegated to them by that agreement." ECF Nos. 36-1-36-6
at ¶ 26.4. The Trust Agreement, in turn, explains that
the Fund's trustees are empowered "to establish such
procedures, rules and regulations ... as shall be necessary
to carry out the operation of the Plan and effectuate the
purpose thereof." ECF No. 36-7 at 6; ECF No. 36-16 at 7.
On November 12, 2013, the Fund's trustees adopted
Amendment Three to the Trust Agreement, which provides:
In any action by the Trust to collect delinquent
contributions from contributing employers to the Trust, the
limitations period for such action shall be governed by the
law of the state in which all or the majority of the
employees on whose behalf the contributing employer makes
contributions work, unless such limitations period is less
than three years, in which case the limitation period under
the law of the District of Columbia shall govern.
ECF No. 39-1 at 17. The District of Columbia has a three-year
limitations period for contract claims. D.C. Code §
12-301(7). The employees covered by the CBAs all worked at
facilities in the State of Florida (ECF No. 36-16 at 2-3; ECF
No. 37-1 at 2-3), which has a five-year statute of
limitations applicable to contract claims, Fla. Stat. §
Plaintiffs' Discovery of Defendants' Delinquencies
filed suit on June 21, 2017, seeking to recoup from
Defendants delinquent pension contributions from January 1,
2009, to December 31, 2010, associated interest, penalties,
and fees. ECF No. 1. Plaintiffs contend that their claims did
not accrue until they completed an audit of Defendants'
2009-2010 payroll records on January 30, 2015. ECF No. 40 at
11. By contrast, Defendants argue Plaintiffs' claims
accrued much earlier when Plaintiffs became aware of
information that Defendants contend would have led a
reasonably prudent pension fund to initiate an audit that
would have revealed the 2009-2010 delinquencies. ECF No. 37-2
at 23-26. Specifically, Defendants contend that the claims
accrued in January 2013, when Plaintiffs filed an action
against Defendants for unpaid contributions to the Fund or,
at the latest, in August 2013, when a whistle-blower informed
the Fund that Defendants had underreported their
employees' hours. Id.
background for the Court's consideration of these issues,
summarized below are the Fund's audit procedures, as well
as the circumstances that led to the discovery of the
delinquencies at issue.
Fund's Audit Procedures
participating in the Fund self-report the number of hours
worked by covered employees each month and remit
contributions consistent with those calculations. ECF No.
36-16 at 13. Because this system relies on data self-reported
by participating employers, the Trust Agreement authorizes
the Fund to conduct periodic random audits of employers'
payroll data to ensure the hours employers have reported are
accurate. Id. at 13-14; ECF Nos. 36-7 at 5, 36-8 at
6-9. Using a lottery system keyed to the record number the
Fund has assigned to each employer, the Fund "endeavors
to audit about one third of participating employers every
year" so that "every employer is usually audited
once every three years or so." ECF No. 36-16 at 14.
the Fund's audits review two to three years of employer
records, comparing the employers' payroll information in
tax and unemployment documents with the payroll information
the employer remitted to the Fund. ECF No. 36-15 at 13-14.
Where an audit reveals an underpayment, the Fund sends the
employer a billing letter assessing the amount of the
underpayment as well as interest, liquidated damages, and a
testing fee that charges the employer for the cost of the
audit. Id. at 15-16. When an employer fails to pay
after receiving a billing letter, the Fund initiates
Fund's 2009 Employer Audit
2009, the Fund randomly selected for a payroll review the
employer record number 'assigned to Defendants, but that
number was also assigned to another participating employer
based on the Fund's erroneous understanding that the
other employer was related to and jointly-operated by
Defendants. ECF No. 36-16 at 16. When the Fund's auditor
arrived and learned that the employers were not related or
jointly-operated, he audited only the other employer and did
not audit Defendants in 2009. Id. at 16-17.
Plaintiffs then assigned the other employer a new record
number so that the issue would not recur. Id. at 17.
Fund's 2013 Lawsuit Against Defendants
January 2013, Plaintiffs filed suit against Defendants in the
U.S. District Court for the Southern District of Florida
seeking to recover delinquent contributions that
Defendants' monthly remittance reports allegedly had
revealed for the years 2008-2012. ECF No. 37-1 at 17; ECF No.
40 at 15-16; see also Serv. Emps. Int'l Union
Nat'l Indus. Pension Fund v. Hebrew Homes Health
Network, Inc., Civ. Action No. 13-cv-20175-JEM (S.D. Fl.
Jan. 16, 2013). Plaintiffs explain that Defendants accrued
the delinquency at issue "by failing to pay the full
amount due as stated in [their] own reports submitted during
the 2008-2012 period." ECF No. 40 at 16. Plaintiffs
suggest that this sort of arrearage differs from amounts due
under an audit, which "represent the difference in what
was reported to the Fund and what was actually worked by
covered employees." Id.
parties settled that case in March 2013, but the Fund
reserved the right "to pursue any amounts that the Fund
may be entitled to recover as a result of an audit conducted
in accordance with the Fund's Trust Agreement and
Statement of Policy for the Collection of Delinquent
Contributions" for the period of November 2003 through
December 2012. ECF No. 37-1 at 18; ECF No. 37-11 at 55.
Michael Alexander's Letter and Meeting with Local 1199
the settlement, on August 12, 2013, the Fund received a
letter from Michael Alexander, a former administrator for
Defendants, alleging that Defendants had "for close to
10 years" underreported covered employees' hours and
consequently underpaid Defendants' contributions to the
Fund. ECF No. 36-16 at 17; ECF No. 37-1 at
19-20; ECF No. 41 at 18-19. Based on the issues raised in Mr.
Alexander's letter, the Fund decided to conduct an audit
of Defendants' payroll records from January 1, 2011,
through August 2013. ECF No. 36-16 at 17; ECF No. 37-1 at 19;
ECF No. 42 at 4. The Fund selected this timeframe because its
usual practice is to examine two to three years of employer
records during an audit. ECF No. 36-16 at 13, 17. In late
August 2013, Local 1199 officials received from Mr. Alexander
(1) a copy of Defendant Aventura Plaza's remittance
report for June 2013 which listed only 36 covered employees
and (2) a full roster of the 112 covered employees working at
that facility. ECF No. 36-16 at 18; ECF No. 37-1 at 20-21.
Local 1199 then sent the materials it received from Mr.
Alexander to the Fund along with a comparison of the June
2013 remittance report with a list of bargaining unit
employees that the union received from Aventura Plaza in
March 201-3. Id; ECF No. 38-2 at 52, 54, 56.
Fund's Audit of Defendants' 2011-2013 Records
October 2013 the Fund conducted an on-site audit of
Defendants' 2011-2013 payroll records according to its
normal procedures, comparing the employers' payroll
information in tax and unemployment documents with the
payroll information Defendants had remitted to the Fund. ECF
No. 36-16 at 14-15, 19; ECF No. 37-1 at 22-23. The audit
revealed that Defendants had significantly underreported
covered employees' hours and consequently substantially
underpaid the contributions due during the 2011-2013 period.
ECF No. 36-16 at 18-19. The Fund notified Plaintiffs of the
audit's findings and requested payment for the amounts it
had calculated .Defendants to owe. ECF No. 36-16 at 19; ECF
No. 37-1 at 23. Between April and July 2014, the parties
negotiated a settlement of the amounts owed under the
2011-2013 audit. ECF No. 36-16 at 19; ECF No. 37-1 at 24. As
a result, those amounts are not at issue in this case.
Fund's Audit of Defendants' 2009-2011 Records
the 2011-2013 audit revealed significant underreporting, the
Fund decided to audit Defendants' payroll records from
2006-2010. ECF No. 36-16 at 19. Defendants evidently had some
difficulty obtaining their payroll records for years before
2009, but they provided the Fund with payroll records for
2009 and 2010. ECF No. 36-16 at 19-20; ECF No. 37-1 at 24;
ECF No. 42 at 4. The Fund conducted a payroll audit of those
records, which concluded on January 30, 2015. ECF No. 36-16
at 20. Like the prior audit, the 2009-2010 audit found that
Defendants had underpaid their contributions for that period
because of the underreporting of employees' hours.
Id; see also ECF No. 36-14 (comparing employee hours
reported to hours due under the CBAs). Based on the outcome
of the 2009-2010 audit, the Fund sent billing letters to
Defendants in May 2017, explaining the outcome of the audit
and requesting payment for the unpaid contributions,
interest, liquidated damages, and testing fees. ECF No. 36-16
at 20; ECF No. 37-1 at 25. When those letters went
unanswered, Plaintiffs initiated this action on June 21,
2017. Id.; ECF No. 1.
Agreement Terms Defining Employee Eligibility for Pension
do not dispute the accuracy of Plaintiffs' damages
calculations except to contend that Plaintiffs have applied
the incorrect criteria for determining which employees were
eligible for pension contributions between October 1, 2010,
and December 31, 2010. This argument turns on when the
modified eligibility criteria found in appendices to the CBAs
became effective ("Pension Appendix" or
"Pension Appendices"). Plaintiffs' damages
calculations apply these modified eligibility criteria
beginning on October 1, 2010, a date drawn from the Pension
Appendices themselves. Defendants contend that the modified
eligibility criteria did not become effective until January
1, 2011, which they contend is the effective date of a
memorandum of agreement ("MO A") Defendants
executed with Local 1199. To place that issue in context, a
summary of the contested eligibility criteria, the
Appendices, and the MOA follows.
CBAs with Local 1199 required Defendants to make pension
contributions on behalf of full-time employees (defined as
those that work at least 32 hours per week), and part-time
employees on a pro-rated basis. ECF No. 36-1 through 36-6 at
¶¶ 1.6, 26.3. Under the original terms of the CBAs,
"per diem employees," defined as those "who
have no regular schedule of work, but report to work on an
'on-call' basis as replacement for regular full and
part time employees," were not entitled to participate
in the pension plan or other benefits. Id. at ¶
for the Sinai Plaza Facility provided that the employer would
make these contributions for each covered employee who had
worked at the facility for at least 90 days. ECF No. 36-5 at
10, 22. The CBAs for the other Defendants provided that the
employer would make contributions for all covered employees
with at least one year of service. ECF Nos. 36-1-36-4, 36-6
at ¶ 26.3.
the original term for each of the CBAs ended in October 2010,
Defendants "continued to abide by the CBAs"
thereafter. ECF No. 37-1 at 7. In the summer of 2011,
Defendants and Local 1199 engaged in negotiations regarding
extending the CBAs and modifying the eligibility criteria for
employee pension contributions. Id. at 7, 9. As a
result of these negotiations, Defendants and Local 1199
executed a Pension Appendix for each Defendant on November
15, 2011. Id. at 9; ECF No. 36-9 at 2, 5, 8, 11, 14,
17. Apart from the name of each employer, the Pension
Appendices are materially identical for each Defendant.
relevant part, the Appendices state that "[a]s of
October 1, 2010, the Employer agrees to contribute to the
Fund ... for all employees covered by the [CBA]" and
provide that "[r]egular full-time and regular part-time
employees shall be covered after the completion of 90 days of
employment" and that per diem employees are covered once
they satisfy certain conditions. ECF No. 36-9 at 2, 5, 8, 11,
14, 17. Each Appendix also explains that "[i]n the event
of any inconsistency between this Appendix and the [CBAs],
the terms of this Appendix shall prevail." ECF No. 36-9
at 4, 7, 10, 13, 16, 19.
roughly the same time, Defendants and Local 1199 also entered
into the MOA, which modified certain provisions in the CBAs,
extended the CBAs' terms through December 31, 2011,
'and provided that they would continue in effect on a
month-to-month basis beginning in January 2012. ECF No. 37-1
at 7; ECF No. 36-10 at 2. The MOA reads, in pertinent part:
parties agree to amend and extend the collective bargaining
agreement[s] . . . for [Defendants' Facilities] as
1. Term of Agreement: through December 31, 2011. As of
January 1, 2012, the parties agree to extend the agreements
on a month to month basis during contract negotiations.
Either party may terminate the extension by providing the
other not less than ten (10) days notice of termination.
5. No. change to pension contributions at each facility,
except the employer will begin contributions after 90 days of