In The Construction Industry and Laborers Health and Welfare Trust v. Archie, No. 2:12-CV-225 JCM (VCF), (D.C. Nevada 2014), the following situation arose. The plaintiffs claim to be fiduciaries, for the purposes of ERISA, of certain multiemployer health and welfare funds (the “Funds”). According to the plaintiffs, the defendants were the officers, directors and/or owners of a corporation named Floppy Mop. This corporation and the Laborers International Union of North America, Local No. 872 signed a collective bargaining agreement (the “CBA”). The CBA required Floppy Mop to submit monthly remittance reports and to make timely contributions based on those reports to the plaintiffs, for deposit in the Funds, on behalf of each employee who performed work covered by the CBA.
In a prior lawsuit, the plaintiffs obtained a judgment against Floppy Mop in the amount of $535,158, based on its failure to make required contributions to the Funds. Plaintiffs have now filed the instant lawsuit against Sheryl Archie and James McKinney, the defendants, whom plaintiffs claim are personally liable for Floppy Mop’s outstanding judgment by virtue of their ownership and control of Floppy Mop.
In analyzing the case, the district court said that, contrary to the defendants’ assertion, the $535,158 judgment is valid. Further, the unpaid contributions to the Funds are considered to be “plan assets” under ERISA, since the Funds’ governing documents identify unpaid employer contributions as plan assets. The documents provide that “all money owed to the [Funds], which money (whether paid, unpaid, segregated or otherwise traceable, or not) becomes a [Fund] asset on the Due Date” and have other, similar language creating plan asset status.
The district court continued, by stating that, since the unpaid contributions are plan assets, the plaintiffs must demonstrate that the defendants exercised authority or control over those assets, so that they become fiduciaries under ERISA, and are personally liable for the judgment. The court then concluded that the plaintiffs have provided ample evidence, taken from the defendants’ own depositions,that demonstrate that the defendants did exercise control and authority over Floppy Mop’s operations and financials, including over the corporation’s payment of the contributions to the Funds, and therefore are ERISA fiduciaries. By virtue of their failure to direct Floppy Mop to make the contributions to the Funds, as required by the CBA, defendants Archie and McKinney are both individually and personally liable for the judgment against Floppy Mop.