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United States District Court, D. Maryland, Southern Division

May 17, 2016

SHEET M WORKERS' LOCAL UNION NO. 100 WASHINGTON, D.C. AREA PENSION FUND, et al., Plaintiffs,
v.
WESTERN SURETY COMPANY, Defendant.

          MEMORANDUM OPINION

          George J. Hazel United States District Judge

         In this action. Plaintiffs, the Sheet M Workers" Local Union No. 100 (the "Union"), Sheet M Workers" Local Union No. 100 Washington. D.C. Area Pension Fund. Sheet M Workers' Local Union No. 100 401 (k) Fund. Sheet M Workers' Local Union No. 100 Washington, D.C. Area Apprenticeship Fund. Sheet M Workers" Local Union No. 100 Washington. D.C. Area Vacation Fund, and Sheet M Workers' Local Union No. 100 Washington, D.C. Area Health Fund (collectively, "Benefit Funds") seek to recover on a fringe benefit bond on which Defendant. Western Surety Company ("Western Surety""), is the surety. Currently pending before the Court is Plaintiffs" Motion for Summary Judgment. ECF No. 30. No hearing is necessary to resolve the Motion. See Local Rule 105.6 (D. Md.). For the reasons that follow. Plaintiffs" Motion is GRANTED, in part, and DENIED, in part.

         I. BACKGROUND[1]

         Before it ceased operations. United Sheet Metal. Inc. ("United") was a sheet m subcontractor that employed members of the Union on various construction projects. ECF No. 32 at 1.[2] In July 2009. the Union and United entered into a collective bargaining agreement ("CBA") in which United agreed to pay set amounts or contributions to the Benefit Funds. ECF No. 30-2 at 37. In a "Washington. D.C. Area Addendum" to the CBA {the "Addendum"), the Union and United agreed to maintain and operate through trustees the various distinct trust funds, which were to be governed in accordance with the Labor-Management Relations Act. 29 U.S.C. §§ 157 el seq. and the Employee Retirement Income Security Act ("ERISA"). 29 U.S.C. 1001 el seq[3] Id. The Union and United also agreed to be bound by the terms of the Benefit Funds' respective Restated Agreements and Declarations of Trust ("Trust Agreements"). Id. at 37-38. Pursuant to the Trust Agreements, the trustees were authorized to enforce the payment of contributions in the manner in which they deemed proper, and the} were not required to compel or enforce payment if. in the opinion of the trustees, any such enforcement would "involve an expense greater to the [Benefit] Fund than the amount to be obtained from any effort to compel or enforce the payment of the [contributions." Id. at 73: see also Id. at 107. 152. 186-87. 235.

         Pursuant to the CBA. United was required to make contributions to each fund for "all hours worked" by Union members no later than the 20th day of the month following the month during which the work was performed: United was deemed "in default" if it failed to abide by this deadline. See Id. at 3. 37-39. United was responsible for self-reporting the number of hours worked by each Union member and. accordingly, for calculating the amount of contributions owed in any given month, though the trustees of the Benefit Funds were required to periodically audit United to ensure that hours were being properly reported and all applicable contributions were paid. Id. at 23. 39. In accordance with this obligation, each month, United submitted remittance reports to Plaintiffs detailing the number of hours worked and contributions owed. See Id. at 3.

         The CBA also required that United post a bond "to ensure the payment of wages. contributions and deductions ...."' Id. at 39. On September 1. 2011, Western Surety issued a Contractors Fringe Benefits Bond (the "Bond") in the amount of $500, 000 naming United as its principal and the Union and Benefit Funds as its obligees. Id. at 250-251. The two-page Bond contract provided, in relevant part:

WHEREAS, the above-named Principal [i.e., United] is employing employees for the purpose of performing sheet m work in the territory within the jurisdiction of the Union as defined in the collective bargaining agreement now in full force and effect between the Principal and the Union . . . which results in the Principal being obligated to pay wages to the employees, pay dues to the Union and pay contributions to the Funds.
NOW. THEREFORE, the conditions of this Bond are such that if the Principal timely pays the amounts due [to] the [Benefit] Funds, the Union and the Employees under the terms of the collective bargaining agreement, any successor thereto, and any other agreement, then the obligation under this Bond shall be void: otherwise the same shall remain in force and effect. It is expressly understood and agreed that the Surety shall become obligated under this Bond to pay such wages, dues, and contributions as are due and unpaid by the Principal. The Surety further agrees to pay any liquidated damages in the amount of 20% of the delinquent contributions, interest on the delinquent contributions at the rate of 1% per month from date due to date paid, and all attorneys' fees and costs incurred by the Union and the [Benefit] Funds in collecting such amounts as are due.

Id. The Bond further provided that Western Surety agreed to pay the Union and Benefit Funds "promptly after receipt of a notice from the Union or the | Benefit] Funds to the Surety of the delinquency in payment of wages, dues or contributions by [United]." Id. at 251. Finally, the Bond allowed Western Surety to cancel it by providing 90 days written notice to Plaintiffs and United. Id.

         On October 4, 2010.[4] United and Western Surety entered a General Agreement of Indemnity ("Indemnity Agreement"), in which United agreed to indemnify Western Surety "against every claim, demand, liability, cost, charge, suit, judgment and expense which [Western Surety] may pay or incur in consequence of having executed . . . [the Bond] . . . . " KCF No. 30-3 at 20. Under the Indemnity Agreement, in the event of a default by United. Western Surety was entitled to all of United's rights under various bonded agreements, all proceeds from bonded contracts, and an assignment of United's "machinery, plant, equipment, tools and materials...'' Id. at 21. Additionally. United was required to provide Western Surety with free access to its books and records, and was required to submit to a credit report at the time the Indemnity Agreement was entered, as well as "in any review or renewal, at the time of any potential or actual claim, or for any other legitimate purpose as determined by [Western Surety] in its reasonable discretion." Id.

         Around October or November of 2013, United fell behind in contributions owed to the Union and Benefit Funds, The Union sent a letter to United on December 5. 2013 notifying United that it owed contributions for work performed in September and October of 2013. ECF No. 30-2 at 253-54. 258. In response. United indicated that it was having difficulty obtaining payment from certain customers and it requested a payment plan to make up for the delinquencies. See id at 256-57. On December 6. 2013, Plaintiffs and United entered a settlement agreement in which they acknowledged that United was behind on payments for September and October and that it appeared unlikely that United would be able to timely submit contributions for November 2013. Id. at 262. Pursuant to the settlement. United agreed to make weekly payments of $100, 000 to pay all amounts due for the periods up to and including the work month of November 2013. Id. In consideration of the settlement agreement. Plaintiffs agreed to forebear from filing suit or pursing a claim under the Western Surety Bond or filing any bond claims with mechanical or other contractors for that time period. Id. at 263.

         On January 20, 2014. United requested that certain contributions owed for work performed in December 2013 be added to the amounts owed under the settlement payment plan, and Plaintiffs agreed to do so. See id at 265. And on February 20. 2014. United requested that certain contributions owed for work performed in January 2014 also be added to the payment plan, and Plaintiffs again agreed. See Id. at 267. At no point between October 2013 and February 2014 was Western Surety provided notice of United's delay in submitting contributions during those months, or of the payment plan entered between Plaintiffs and United. ECF No. 32 at 2.

         United continued to submit weekly payments of $100, 000 to Plaintiffs through March 6. 2014. ECF No. 30-2 at 6. Then, on March 13. 2014. the Union received notice that United had ceased operations and laid off its employees. Id; see also Id. at 270. As of that date. United had submitted weekly payments sufficient to pay Plaintiffs for all amounts owed through December 2013, as well as part of the contributions owed for January 2014. Id. at 6.

         On March 20, 2014. Plaintiffs sent a letter to Western Surety notifying it that United had ceased operations on March 12. 2014 and that Plaintiffs sought to recover under the Bond. Id. at 270. The letter indicated that the amount due for January 2014 was $314, 138.32. but that United had a credit of $92, 262.66 that was applied to that amount, leaving a balance of $221, 875.66. Id. at 269. The letter further noted that interest was due on any January contributions paid late, which would be calculated once all January contributions were received by Plaintiffs, and that Plaintiffs would separately request attorneys' fees and costs. Id. at 269-70. Finally, the letter indicated that United would still owe contributions for work completed in February and March 2014, and that if Plaintiffs did not receive the amounts owed when they became due. Plaintiffs would amend their bond claim to include those sums, interest, and additional attorneys' fees and costs. Id. at 270. Attached to the letter were the reports submitted by United to Plaintiffs documenting the hours worked and contributions owed for the month of January 2014. Id. at 271-342.

         On March 21. 2014. Plaintiffs sent another letter to Western Surety notifying it that United failed to pay contributions owed for work completed in February 2014. which totaled $332, 162.96. Id. at 345-46. And on June 24. 2014. Plaintiffs informed Western Surety that United failed to pay contributions owed for work completed in March 2014. which totaled $117, 162.63. Id. at 413-14. Attached to both the March 21 and June 24 letters were the reports that United submitted to Plaintiffs documenting the hours worked by Union members during the months of February and March 2014 and the total contributions owed for those months. Id. at 347-410, 415-43. In all. the amount claimed on the Bond totaled $671, 201.25. plus interest, late fees, attorneys' fees and costs. Id. at 413. After receiving notice of these claims under the Bond, in July 2014, Western Surety registered its Indemnity Agreement with United as a security interest with the Maryland Department of Assessments and Taxation and the Florida Secured Transaction Registry. See ECF No. 30-3 at 29-60.

         Between January and March 2014. United served as a subcontractor on at least twelve different construction projects."[5] See ECF No. 30-2 at 519. Plaintiffs indicated in the June 24 letter that they had filed claims for payment on project-specific bonds securing work performed by United on multiple projects. Id. at 414. As of that date, however. Plaintiffs had not received payment on any of those bond claims, Id.

         Western Surety initially responded to Plaintiffs claims by seeking further documentation to aid its investigation of the Bond claim, such as copies of the CBA and documentation setting forth the contribution rates. Id. at 445-46. Plaintiffs supplied the requested documentation on April 7, 2014. Id. at 448-96. On July 31. 2014, Western Surety sought additional information from Plaintiffs, specifically:

(1) the projects on which the fringe benefit contributions are attributable, (2) the amounts of the claims on a project-by-project basis. (3) those parties in the contractual chain (e.g.. the owners, general contractors and subcontractors in the tiers above United . . .) for each project, (4) whether there are any contract, subcontract or sub subcontract payment bonds. (5) whether United .. . furnished a contractor's license bond and (6) the identity of any sureties.

Id. at 498. Plaintiffs responded with certain requested information on or around August 8. 2014. Id. at 501. They provided documentation of the hours worked by Union members on five projects during the relevant time period between January and March 2014. See Id. at 503-09, 540-66. Plaintiffs indicated that they had Hied bond claims for funds owed on four different jobs: $72, 115.46 for work completed by Union members at St. Charles High School. S4.063.44 for work completed at Hyattsville Elementary. $42, 273.08 for work completed at Rockville Judicial Center Annex, and $63, 304.16 for work completed at Coppin State University. Id. at 501. Plaintiffs also provided copies of the bonds for three of those projects, but indicated that despite their efforts, they were unable to obtain a copy of the bond for the Coppin State University project.[6] Id: see also Id. at 510-17. 520-24, 525-31. Project-specific bonds existed for an additional five projects on which Union members worked, but Plaintiffs did not submit claims on those bonds. See ECF No. 31 -2; ECF No. 31 -8; ECF No. 31 -11; ECF No. 31 -13: ECF No. 31-14; ECF No. 32-1 at 4-5. As of the filing of the present Motion, however. Plaintiffs have fully recovered the contributions owed for hours worked on three projects, and have tiled a lawsuit to enforce a bond covering a fourth project. ECF No. 30-2 at 7-8.

         After Western Surety refused to remit any payment on Plaintiffs' bond claim. Plaintiffs initiated the present action in the Circuit Court for Prince George's County. Maryland. See ECF No. 2. Western Surety removed the action to this Court on the basis of diversity jurisdiction on April 24, 2015. See ECF No. 1; see also 28 U.S.C. § 1332; 28 U.S.C. 1441. Western Surety answered Plaintiffs" Complaint on May 1. 2015. and Plaintiff filed the pending Motion for Summary Judgment on October 19. 2015. ECF Nos. 16 & 40.

         II. STANDARD OF REVIEW

         "Under [Federal Rule of Civil Procedure] 56(c). summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."" Celotex Corp. v. Catrett, 477 U.S. 317. 322. 106 S.Ct. 2548 (1986) (quoting Fed.R.Civ.P. 56(c)). The party moving for summary judgment bears the burden of demonstrating that no genuine dispute exists as to material facts. Pulliam Inv. Co. v. Cameo Props.. 810 F.2d 1282. 1286 (4th Cir. 1987). If the moving party demonstrates that there is no evidence to support the non-moving party's case, the burden shifts to the non-moving party to identify specific facts showing that there is a genuine issue for trial. See Celotex, 477 U.S. at 322-23. Importantly, at the summary judgment stage, it is not the Court's function to weigh the evidence but simply to decide if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242. 249. 106 S.Ct. 2505 (1986). A "genuine" ...


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