Nilsen v. Master Floors of Minnesota, Inc.

Background

The plaintiffs are trustees and fiduciaries of employee-benefit funds seeking unpaid fringe-benefit contributions under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1145. Master Floors of Minnesota, Inc. agreed to be bound by a collective bargaining agreement (CBA) requiring contributions for covered carpentry and floorcovering work. Daniel S. Carlson signed the CBA for Master Floors and agreed to be bound individually. Under a separate addendum, entities in which Carlson owned at least 25% also became bound to the CBA for covered work. The opinion states that Carlson owned at least 25% of Master Floors, DC Nicollet Development, LLC, and New Life Properties, LLC.

The plaintiffs’ auditor reviewed records for January 1, 2022, through December 31, 2023. The companies did not provide adequate payroll records, timecards, or other records showing employees’ hours and work types. Applying the funds’ audit policy, the auditor used available invoices, checks, bank records, and tax forms to estimate covered hours and unpaid contributions. The plaintiffs sought summary judgment for unpaid contributions, liquidated damages, interest, attorneys’ fees, and costs.

Carlson’s Liability for New Life Gardens and Up We Go

New Life Gardens LLC and Up We Go LLC were wholly owned by New Life Properties, which was wholly owned by Carlson. The court held that the addendum’s provision binding entities in which Carlson owned at least 25% did not apply because Carlson did not directly own those entities. The court also held that Carlson’s individual promise to comply with the CBA did not make him liable for obligations of entities that were not parties to the CBA.

The court declined to consider a separate theory that New Life Properties might be liable for New Life Gardens’ and Up We Go’s obligations because the plaintiffs had not presented that theory in their summary-judgment briefing. The court therefore denied summary judgment as to liability for New Life Gardens and Up We Go.

Unpaid Contributions

The court applied a burden-shifting rule. The funds had to show that an employer performed some covered work, failed to keep adequate records, and that the funds had calculated the contributions owed. The employer then had to provide evidence identifying specific facts that called the audit’s accuracy into question. The defendants did not dispute that the plaintiffs met their initial burden.

For Master Floors, the defendants’ proposed hourly rate and objections about materials and profit margins were unsupported or conclusory. The court granted summary judgment for $496,643.36 in unpaid contributions, after deducting $3,744.40 for an employee who did not perform covered work.

For New Life Properties, the defendants argued that the auditor included employees who performed work outside the CBA’s coverage. The court found that Carlson’s unsupported statements did not create a genuine dispute of material fact. The court granted summary judgment for $1,397,263.46.

For DC Nicollet, the defendants argued that the auditor’s calculation duplicated the New Life Properties calculation and included uncovered work. The court found those arguments unsupported and granted summary judgment for $331,778.85.

Because Carlson was individually bound to the CBA for the obligations of Master Floors, New Life Properties, and DC Nicollet, the court held him jointly and severally liable for their unpaid contributions totaling $2,225,685.67.

Liquidated Damages and Interest

The CBA required delinquent employers to pay liquidated damages equal to 10% of unpaid contributions. It also required interest at the rate provided by 26 U.S.C. § 6621. The defendants did not dispute the plaintiffs’ entitlement to these amounts or the auditor’s interest calculation.

The court awarded $49,664.36 in liquidated damages and $32,982.56 in interest against Master Floors; $139,726.34 in liquidated damages and $92,793.61 in interest against New Life Properties; and $33,177.88 in liquidated damages and $22,033.75 in interest against DC Nicollet. Carlson was held jointly and severally liable for these liquidated damages and interest totaling $370,378.50.

Attorneys’ Fees and Costs

The court held that an award of reasonable attorneys’ fees and costs was mandatory under ERISA because the plaintiffs obtained a judgment in favor of the benefit plans. The court invited the plaintiffs to submit a motion detailing their fees and costs; it did not set a fee or cost amount in this order.

Disposition

The court ordered that the plaintiffs’ motion for summary judgment was GRANTED IN PART AND DENIED IN PART. It entered summary judgment for $579,290.28 against Master Floors of Minnesota, Inc.; $1,629,783.41 against New Life Properties, LLC; and $386,990.48 against DC Nicollet Development LLC. Daniel S. Carlson was held jointly and severally liable for those judgments in the total amount of $2,596,064.17. The court ruled that the plaintiffs were not entitled to summary judgment against New Life Gardens LLC or Up We Go LLC.