Demopoulos v. United Metro Energy Corp.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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DEMOS P. DEMOPOULOS, VICTOR

CASTELLANO, VINCENT THEURER

and JEFF HAMMOND, as Trustees and

Fiduciaries of the LOCAL 553

PENSION FUND; and as Trustees and MEMORANDUM AND ORDER

Fiduciaries of the LOCAL 553 Case No. 19-cv-5289 (FB) (RML)

DEFERRED COMPENSATION FUND;

and as Trustees and Fiduciaries of the

LOCAL 553 BENEFITS FUND,

Plaintiffs,

-against-

UNITED METRO ENERGY CORP.,

UNITED APOLLO PETROLEUM

TRANSPORTATION CORP., and

UNITED APOLLO TRANSPORTATION

CORP.,

Defendants.

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Appearances: For the Defendants:

For the Plaintiffs: ANA GETIASHVILI

WILLIAM ANSPACH JONATHAN D. FARRELL

LEO GERTNER MARK A. RADI

Friedman & Anspach Meltzer, Lippe, Goldestein &

1500 Broadway, Suite 2300 Breistone, LLP

New York, NY 11036 190 Wllis Avenue

Mineola, NY 11501

BLOCK, Senior District Judge:

In this Employee Retirement Income Security Act (“ERISA”) case,

Plaintiffs, the Trustees and Fiduciaries of the Local 553 Pension Fund, the Local

553 Deferred Compensation Fund, and the Local 553 Benefits Fund (collectively,

“Plaintiffs” or the “Funds”) seek an audit of the records of Defendants United

Metro Energy Corp. (“UMEC”), United Apollo Petroleum Transportation Corp.

(“UAP”), and United Apollo Transportation Corp. (“UAT”) to determine whether

Defendants owe delinquent contributions on behalf of covered employees under a

multiemployer collective bargaining agreement (“CBA”). Both parties move for

summary judgment. For the following reasons, Plaintiffs’ motion for an audit is

granted, and Defendants’ motion is denied.

I. BACKGROUND

A. Legal Standards

The following facts are taken from the pleadings, the parties’ Rule 56.1

statements, and the supporting documentation. The facts are undisputed unless

otherwise noted. A moving party is entitled to summary judgment when it shows

“that there is no genuine dispute as to any material fact and the movant is entitled

to judgment as a matter of law.” Fed. R. Civ. P. 56(a). When both parties move

for summary judgment, the Court examines each party’s motion on its own merits

and draws all reasonable inferences against the party whose motion is under

consideration. See Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of N.Y., 822

F.3d 620, 631 n.12 (2d Cir. 2016) (internal quotation marks and citation omitted).

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B. The Parties, Union, and Master Contract

This case is the latest salvo in a long war of attrition between the Funds,

Local 553, International Brotherhood of Teamsters, (“the Union”), and Defendants

over Defendants’ alleged obligations under a multiemployer CBA involving fuel

and heating-oil delivery drivers (the “Master Contract.”)1 The Funds are employee

benefit plans established pursuant to CBAs between the Union and employers that

operate pursuant to Trust Agreements and provide pension, deferred compensation,

and other benefits.

This dispute largely turns on whether Defendants are subject to Funds

obligations under the Master Contract. The Union has two relevant multiemployer

CBAs: (1) the Master Contract, covering drivers performing residential or retail

1 This Court has already seen substantially the same contractual dispute between

the Union, the Plaintiffs, and the Defendants in three dockets. First, UMEC moved

to stay the Union’s requested arbitration as to interpretation of the 2017

Memorandum of Agreement. See, e.g., United Metro Energy Corp. v. Loc. 553,

I.B.T., No. 1:22-CV-00151-FB-RLM, 2022 WL 2390993, at *1 (E.D.N.Y. July 1,

2022) (enforcing arbitration clause as to whether drivers are covered by the Bulk

Contract or Master Contract). Second, the Union moved to vacate the ensuing

arbitration award. See Loc. 553, I.B.T v. United Metro Energy Corp et al, No. 23-

cv-2219 (FB)(RML) (E.D.N.Y. June 30, 2023) (confirming arbitration award).

Third, in this ERISA case, the Court has already written two opinions, first

granting Plaintiffs’ motion to amend their complaint, and then denying

Defendants’ motion for reconsideration. See Demopoulos v. United Metro Energy

Corp., No. 119CV05289FBRLM, 2022 WL 2390986, at *1 (E.D.N.Y. July 1,

2022), reconsideration denied, No. 19CV5289FBRLM, 2023 WL 2683012

(E.D.N.Y. Mar. 29, 2023).

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work, i.e., smaller deliveries with stops at multiple locations, and (2) the “Bulk

Contract,” covering drivers performing the delivery of “bulk” work, i.e., large or

full fuel loads to one or two stops. The Master Contract is more favorable for

drivers because it provides higher pay rates and, unlike the Bulk Contract, requires

employers to make Funds contributions for covered work. The Master Contract

incorporates the Trust Agreement and provides a right to audit “whenever such

examination is deemed necessary or advisable by the Trustees.”

In 2013, Defendant UMEC purchased the assets of a company called Metro,

which was in bankruptcy. Metro was composed of two companies — Apollo

Petroleum Transportation, Inc. (“Apollo 1”) and Apollo Petroleum Transportation,

LLC (“Apollo 2”) — and had employed drivers covered by both the Master and

Bulk Contracts. Mirroring this structure, UMEC created UAT and UAP.2

After the asset purchase, Defendants continued to employ three employees

formerly employed by Apollo 1 and about fifty drivers employed by Apollo 2.

While Defendants ultimately executed the 2013-17 and 2017-21 Bulk Contracts,

the parties dispute whether, and to what extent, Defendants adopted the Master

2 The parties contest the relationship between Defendants because, Plaintiffs argue,

they are alter egos. For the sake of brevity, the Court will refer to “Defendants” in

the following discussion while noting that Defendants dispute which entity was

involved in what.

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Contract with their conduct. Although Defendants never signed the Master

Contract, it is uncontested that Defendants continued to provide the three Apollo 1

employees previously under the Master Contract — John Spaight (“Spaight”),

Thomas Galasso (“Galasso”) and Paul Senatore (“Senatore”) — with the Master

Contract’s pay and benefits and submitted Funds contributions and remittance

reports on their behalf. These contributions and payments continued until Spaight

moved to management in 2013, and Galasso and Senatore retired in June 2013 and

May 2015, respectively. For around two years, Defendants made no Funds

contributions, although Plaintiffs intimate that Defendants should have been

making contributions because drivers were performing covered work under the

Master Contract. By 2017, Plaintiffs estimate there were at least five drivers

performing work covered by the Master Contract.

In July 2017, UMEC and the Union signed a Memorandum of Agreement

(“MOA”) extending the Bulk Contract and stating in Paragraph 11:

The Employer shall honor and be bound by and execute the Local 553

Fuel Industry Master Contract as of March 1, 2017, expiring

December 15, 2019, which shall initially cover five (5) Drivers

performing retail delivery work who shall be chosen be seniority from

the current bulk seniority list.

After signing the MOA, Defendants submitted remittance reports and paid

Funds contributions for the initial five drivers until January 2020.

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C. Litigation History

Plaintiffs commenced this litigation in 2019, seeking an audit and alleging

that when the Funds’ auditors sought to conduct a payroll compliance audit in July

2019, Defendants refused to produce necessary documents. Concerned that

Defendants had not fully reported work covered by the Master Contract, the

auditors determined that a full audit from March 1, 2013, through December 31,

2018, was necessary. Defendants refused to produce the relevant records.

The MOA also gave rise to separate litigation, involving the Union,

rather than the Funds, and UMEC. After two of the initial five retail

delivery drivers covered by the Master Contract retired, the Union requested

that UMEC apply the Master Contract to the next two most senior retail

delivery drivers. When UMEC refused, the Union filed a grievance in 2020.

UMEC refused to arbitrate, instead initiating litigation before this Court to

enjoin arbitration. This Court granted the Union’s Rule 12(b)(6) motion to

dismiss, finding that the matter must be submitted to arbitration pursuant to

agreements between the Union and UMEC. See United Metro Energy Corp.

v. Loc. 553, I.B.T., No. 1:22-CV-00151-FB-RLM, 2022 WL 2390993

(E.D.N.Y. July 1, 2022).

In February 2023, Arbitrator Howard C. Edelman issued an award

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(the “Arbitration Award”) that found that this disputed language required

UMEC only to pay the Master Contract rates, as an initial matter, to the five

drivers who make retail deliveries and denied the Union’s grievance.

The Union moved to vacate the Award before this Court. However,

on June 30, 2023, under a deferential standard of review, the Court

confirmed the Award’s determination that the MOA “did not require

[UMEC] to pay all retail delivery drivers in accordance with the rates set out

in the Master Contract, only that five of them who did engage in retail work

receive higher pay.” See Loc. 553, I.B.T v United Metro Energy Corp. et al,

Docket No. 23-cv-2219 (FB) (RML) (E.D.N.Y. June 30, 2023).

II. DISCUSSION

A. Whether Defendants Adopted the Master Contracts

The primary issue is whether, and to what extent, Defendants adopted the

Master Contracts, which require Funds contributions and, by incorporating the

Trust Agreements, provide audit rights. See Trustees of the Sheet Metal Workers’

Nat. Pension Fund v. Steel & Duct Fabrication, Inc., 124 F. Supp. 3d 187, 196

(E.D.N.Y. 2015) (trustees have audit rights under contractual language and law of

employee benefit plans) (citing Central States, Southeast and Southwest Areas

Pension Fund v. Central Transp., Inc., 472 U.S. 559, 569, 571–73, 581 (1985)).

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1. 2010-13 and 2013-16 Master Contracts

While both parties agree that, before the 2017 MOA, Defendants never

signed the Master Contracts or another document, they disagree as to whether

Defendants adopted the Master Contracts through their conduct, which would

require Defendants to make Funds contributions for covered work. The Court

concludes that Defendants adopted the 2010-13 and 2013-16 Master Contracts

with their conduct.3

A party need not sign a CBA to have an obligation to make ERISA plan

obligations. See Brown v. C. Volante Corp., 194 F.3d 351, 355 (2d Cir. 1999) (61

remittance reports, employer’s cooperation with the audit, payment of union wages

to employees, employer’s letter to the Trustees acknowledging appellant's

“responsibility to the funds,” are sufficient, absent contrary evidence, to establish

as a matter of law employer’s intent to adopt the two unsigned CBAs). Instead, a

court must examine surrounding circumstances and the conduct of the parties to

ascertain the parties’ intent to be bound to a CBA. See Bricklayers Ins. & Welfare

Fund Bricklayers Pension Fund v. P.P.L. Constr. Servs. Corp., No. 12-CV-3940

DLI RML, 2015 WL 1443038, at *5 (E.D.N.Y. Mar. 27, 2015) (collecting cases).

3 During the relevant period, the Master Contracts were negotiated every three

years.

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Relevant indicia of a party’s intent to be bound to a CBA include making Funds

contributions, timely filing remittance reports, remitting union dues, submitting to

an audit by the union, and paying CBA wages and benefits. See id.; see also

Trustees of Loc. 7 Tile Indus. Welfare Fund v. Goal Enterprises, Inc., No. 20-CV-

1958 (KAM) (RER), 2022 WL 17820088, at *4 (E.D.N.Y. July 6, 2022).

Plaintiffs have established, as a matter of law, that Defendants adopted the

2010-13 and 2013-16 Master Contracts through their conduct. Specifically, they

provide extensive evidence that: (1) Defendants submitted 31 monthly remittance

reports that refer to the Trust Agreements governing the Funds; (2) Defendants

paid Funds contributions at the rates specified in the Master Contracts; (3)

Defendants paid the three employees the higher wages and provided the vacations

and holidays specified in the Master Contract; (4) Defendants withheld union dues

for the employees; and (5) Defendants submitted to audits of their books and

records for 2013, 2014, 2015, and 2017, and paid any amounts found owing by the

auditor. This conduct more than sufficiently manifests Defendants’ intent to adopt

the CBA. See Gesualdi v. N. Star Concrete, Inc., No. CV144430SJFAYS, 2016

WL 7974111, at *8 (E.D.N.Y. Dec. 28, 2016), report and recommendation

adopted, No. 14CV4430SJFAYS, 2017 WL 354188 (E.D.N.Y. Jan. 24, 2017)

(numerous remittance reports, funds contributions, and submittal to audits provides

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“ample evidence” to grant plaintiff summary judgment).

Defendants’ principal explanation of their behavior is that they merely did

the Union a “favor” by “informally” paying the employees under the Master

Contract, which, they urge, does not amount to full adoption of the Master

Contract for all covered work. But whatever Defendants’ subjective intention, it is

their objective conduct that binds them to the Master Contract. See Klos v.

Lotnicze, 133 F.3d 164, 168 (2d Cir. 1997) (in contract analysis, objective intent of

parties, rather than “secret or subjective” intent, controls). And courts have

generally found unpersuasive a defendant’s inaction, i.e., not signing the

agreement, when it seems “reasonable that [the defendant] would have made some

sort of express statement that, although it had been or would be complying with the

CBA in many respects, it was not adopting or assuming that agreement.” Serv.

Emps. Int’l Union, Loc. 32BJ v. Coby Grand Concourse, LLC, No. 04 CIV.

9580(CSH), 2006 WL 692000, at *4 n.2 (S.D.N.Y. Mar. 16, 2006). Defendants

cannot rely on post hoc disavowal.

Contrary to Defendants’ assertion that they merely intended to cover specific

drivers, rather than covered work, Defendants assumed the obligation to make

Funds contributions for all covered work. See Gesualdi, 2016 WL 7974111, at *9

(employer obligated to make contributions for work covered by the CBA);

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Trustees of the Buffalo Laborers’ Pension Fund v. Accent Stripe, Inc., No. 01-CV-

76C(SC), 2007 WL 1540267, at *6 (W.D.N.Y. May 24, 2007) (employer obligated

to contribute for all employees performing covered work, regardless of union

status). Defendants appear to have perfectly understood that the Bulk and Master

Contracts covered different types of work. As UMEC President Anthony Peretta

stated in his deposition: a driver performing covered residential work would “come

under the master agreement”; “if we needed the drivers to make the residential

deliveries, they were covered under the master contract”; and “everybody at that

table that’s in the industry, aside from the lawyers, knew what bulk drops meant.”

And from a labor relations perspective, it would make little sense if Defendants

could dodge the Master Contract’s obligations by having different employees

perform covered retail work.

Accordingly, because Defendants adopted the 2010-13 and 2013-16 Master

Contracts, Plaintiffs are entitled to an audit, and, if Defendants’ employees were

performing covered work, Plaintiffs are entitled to Funds contributions.

2. 2016-19 Master Contract

As to the 2016-19 Master Contract, the Court finds that by signing the 2017

MOA, Defendants adopted the Master Contract’s obligations only as to the five

drivers initially chosen from the seniority list. Although Defendants are incorrect

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that either collateral estoppel or res judicata applies because Plaintiffs were not a

party to the Arbitration,4 see Trustees of New York City Dist. Council of

Carpenters Pension Fund, Welfare Fund, Annuity Fund, Apprenticeship,

Journeyman Retraining Educ. & Indus. Fund v. Nicholas Indus. & Constr. Servs.

Inc., No. 18 CIV. 2098 (LLS), 2019 WL 418497, at *1 (S.D.N.Y. Jan. 18, 2019)

(rejecting res judicata argument), the Court finds the Arbitration Award’s

reasoning persuasive.

Arbitrator Edelman concluded that UMEC did not violate the MOA because

of the MOA’s language. The MOA provided that the Master Contract “shall

initially cover five (5) Drivers performing retail delivery work,” which, Arbitrator

Edelman concluded, meant that the only guarantee was that those five drivers

would receive the Master Contract’s higher pay. Thus, the MOA operated as a

ceiling, rather than a floor. Arbitrator Edelman also reasoned that the parties were

capable of crafting language covering all retail delivery work but chose not to.

Plaintiffs argue that Defendants fully adopted the Master Contract with their

conduct and by signing the MOA. The critical distinction for this period, however,

is that the MOA’s language specifically limits the Master Contract’s rates and

4 For this reason, as well as the Arbitration Award’s consideration of the 2017

MOA, rather than Defendants’ pre-2017 conduct, the Award does not bar all of

Plaintiffs claims.

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benefits to the initial five drivers. Accordingly, the Court finds that the Defendants

are bound to the Master Contract only as to the initial five drivers.

B. Whether Defendants Are Alter Egos

The Court finds that Defendants are alter egos, which entitles Plaintiffs to

seek records from all Defendants during their audit. The alter ego doctrine

provides the analytical hook to bind non-signatories to a CBA when the enterprises

“have substantially identical management, business purpose, operation, equipment,

customers, supervision, and ownership.” Ret. Plan of UNITE HERE Nat. Ret.

Fund v. Kombassan Holding A.S., 629 F.3d 282, 288 (2d Cir. 2010). The doctrine

has traditionally focused on “an attempt to avoid the obligations of a collective

bargaining agreement through a sham transaction or technical change in

operations.” Truck Drivers Local Union No. 807 v. Reg’l Import & Export

Trucking Co., 944 F.2d 1037, 1046 (2d Cir. 1991).

Plaintiffs have sufficiently shown that Defendants are alter egos. As set

forth extensively in Plaintiffs’ papers, Defendants shared the same business agent,

had substantially identical management and supervision, engaged in substantially

identical business, and used the names of the three entities interchangeably.

Peretta testified that a UMEC manager assigned work to all drivers, and as this

Court previously noted, UMEC Vice Chairman Nelson Happy (“Happy”) appeared

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“uninformed of the subsidiaries’ relationship,” could not “clearly distinguish the

companies,” and “could not even provide details about their ownership.”

Demopoulos, 2022 WL 2390986, at *2.

While “an intent to evade union obligations” is not a “necessary factor,” it is

“a germane or sufficient basis for imposing alter ego status.” UNITE HERE, 629

F.3d at 288 (cleaned up). Here, Defendants first distinguished between the entities

at a late hour in this litigation, disclaiming UMEC’s contractual obligations and

stating that UAT was the sole employer of the three employees under the Master

Contract. Because Plaintiffs initially named only UMEC as a defendant and

included UAP and UAT as aliases rather than separate defendants, UMEC

appeared to be playing a “shell game” to avoid contractual obligations. As this

Court noted in allowing Plaintiffs to add alter ego allegations, Defendants

introduced this confusion “likely in the hopes that all three entities could avoid

liability to the Funds.” See Demopoulos v. United Metro Energy Corp., No.

119CV05289FBRLM, 2022 WL 2390986, at *2 (E.D.N.Y. July 1, 2022),

reconsideration denied, No. 19CV5289FBRLM, 2023 WL 2683012 (E.D.N.Y.

Mar. 29, 2023). This context, as well as Plaintiffs’ evidence, suffices to show

Defendants’ alter ego status.

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C. Relief

Based on the preceding discussion, Defendants must contribute to the Funds

for drivers performing covered work under the 2010-13 and 2013-16 Master

Contracts and for the five drivers initially chosen under the 2016-19 Master

Contract. To determine whether Defendants were delinquent, Plaintiffs are entitled

to an audit and an injunction directing Defendants to “permit and cooperate in the

conduct of an audit of its records.” Annuity, Welfare and Apprenticeship Skill

Improvement & Safety Funds of the Int'l Union of Operating Eng'rs Local 15, 15A,

15C & 15D, AFL-CIO v. Lori Contracting, Inc., No. CV 2014-2467(RJD)(MDG),

2015 WL 1321672, at *3 (E.D.N.Y. Mar. 5, 2015) (internal quotation marks and

citations omitted), adopted, 2015 WL 1359072 (E.D.N.Y. Mar. 24, 2015).

As to the scope of the audit, the audit must be “no broader in scope than

necessary to achieve its objective and no more extensive than the scope of the

trustees’ authority.” New York State Teamsters Conf. Pension & Ret. Fund v.

Boening Bros., 92 F.3d 127, 134 (2d Cir. 1996). Because Defendants are alter

egos, Plaintiffs are entitled to audit all three Defendants’ books and records to

determine whether contributions are missing under the 2010-13 and 2013-16

Master Contracts. However, because Defendants’ obligations under the 2016-19

Master Contract are limited to the five drivers, Plaintiffs may only audit books and

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records pertaining to those five employees.

At this stage, the Court does not express any opinion on whether Defendants

are delinquent on any contributions. Magistrate Judge Mann has already ordered

that if the audit produces any dispute as to whether Defendants were delinquent in

making contributions, additional discovery and a potential damages hearing could

be required. See ECF 16.

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III. CONCLUSION

For the foregoing reasons, Plaintiffs’ motion is granted, and Defendants’

motion is denied. The Court issues an injunction allowing Plaintiffs to conduct an

audit of Defendants’ books and records for the time period from March 1, 2013,

through December 31, 2018. Because Defendants adopted the 2010-13 and 2013-

16 Master Contracts, Plaintiffs have the right to Defendants’ books and records to

determine if Defendants failed to make Funds contributions for work covered by

the Master Contract. However, because the Defendants adopted the 2016-19

Master Contract only with respect to the initial five drivers, Plaintiffs’ audit right is

limited to those specific drivers.

SO ORDERED.

_/S/ Frederic Block__________

FREDERIC BLOCK

Senior United States District Judge

Brooklyn, New York

May 23, 2024

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