Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-02110/USCOURTS-azd-2_04-cv-02110-2/pdf.json

Nature of Suit Code: 720
Nature of Suit: Labor Management Relations Act
Cause of Action: 29:185 Labor/Mgt. Relations (Contracts)

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Dale Jacks, as trustee of the Plaintiff TaftHartley trust funds, et al.,

Plaintiffs, 

vs.

JBJ Electric Co., LLC., 

Defendant. 

JBJ Electric Co., LLC.,

Counter-Claimant,

vs.

Dale Jacks, as trustee of the Plaintiff TaftHartley trust funds

Counter-Defendants.

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No. CIV 04-2110-PHX-MHM

ORDER

Currently before the Court is Plaintiffs Dale Jacks and Debra Margraf’s, as trustees

of the Plaintiff Taft-Harley trust funds (“Plaintiffs”), Motion for Summary Judgment.

(Dkt.#92). After reviewing the pleadings and record and finding oral argument to be

unnecessary, the Court issues the following Order. 

I. Procedural History 

Plaintiffs, as representatives of various trust funds, filed this amended action seeking

to collect contributions owed to them under a collective bargaining agreement entered into

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1

 This case was originally filed on October 7, 2004, and underwent several rounds of

motions challenging certain aspects of the pleadings before the filing of Plaintiff’s Amended

Complaint. 

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between Defendant JBJ Electric Company, LLC (“Defendant” or “JBJ”) and International

Brothers of Electrical Workers, Local 640, (the “Union”). (Dkt.#85). Plaintiffs assert claims

under the Labor Management Relations Act, 29 U.S.C. § 185 (“LMRA”) and the Employee

Retirement Security Act, 29 U.S.C. § 1132 (“ERISA”) (Dkt.#85). Defendant has answered

denying Plaintiffs’ allegations and counterclaimed asserting a declaratory claim of fraud in

the execution regarding the subject collective bargaining agreement upon which Plaintiffs

rely. (Dkt.#86).1

 On February 16, 2007, Plaintiffs filed the instant Motion seeking (1)

dismissal of Defendant’s counterclaim of fraud in the execution upon summary judgment

review; (2) a ruling that Defendant did not properly terminate the subject collective

bargaining agreement prior to June 25, 2005; and (3) an award of appropriate damages in

support of Plaintiffs’ collection claims against Defendant. The Motion is fully briefed and

ripe for this Court’s review. 

II. Factual Background

The Plaintiff trust funds, IBEW Local Union No. 640 and Arizona Chapter NECA

Health & Welfare Fund; IBEW Local Union No. 640 and Arizona Chapter NECA Pension

Fund; National Electrical Benefit Fund; and Phoenix Electrical Industry Joint Apprenticeship

and Training Committee are Taft-Hartly trust funds. Plaintiffs Dale Jacks and Debra Margraf

are each duly appointed representatives empowered to represent the trust funds. Defendant

is and has at all relevant times acted as a construction contractor within Maricopa County,

Arizona. Defendant was formed by Daniel H. Roth and his wife and acts as a limited liability

company. 

The Plaintiffs seek to enforce the terms and provisions of a document entitled Letter

of Assent “Form B” (the “Letter of Assent - B”) signed by Mr. Roth, on behalf of Defendant

JBJ on October 23, 2003. (Plaintiff’s Statement of Facts “PSOF” ¶ 18). The Letter of Assent

- B provides in pertinent part:

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This is to certify that the undersigned employer has examined a copy of the

current INSIDE labor agreement between ARIZONA CHAPTER, N.E.C.A.

and Local Union 640, IBEW.

The undersigned employer hereby agrees to comply with all of the provisions

contained in the above mentioned agreement and all approved amendments

thereto, as well as subsequent approved agreements between ARIZONA

CHAPTER, N.E.C.A and Local Union 640, IBEW. It is understood that the

signing of this letter of assent shall be binding on the undersigned employer

as though he had signed the above referred to agreement, including any

approved amendments thereto, and any subsequent approved amendments. 

(PSOF ¶ 19). 

The Inside Agreement, a collective bargaining agreement, referenced in the Letter of

Assent - B, possesses provisions obligating the employer, Defendant, to make certain

contributions with respect to covered employees based upon the number of hours worked.

(PSOF ¶ 46). Prior to the signing of the Letter of Assent - B, Defendant, upon receiving a

standard package of documents, including blank forms of the Letter of Assent - B, a Letter

of Assent “Form A” (“Letter of Assent - A”) and employer bond, signed the Letter of Assent

- A on October 12, 2003. (PSOF ¶ 32) The Letter of Assent - A, while possessing certain

different characteristics of the Letter of Assent - B also incorporates the Inside Agreement

of the Letter of Assent - B. (PSOF ¶ 34). During the meeting between Mr. Roth and Steve

Speer, acting as a representative of the Union, on October 23, 2003, Defendant executed the

Letter of Assent - B and it was put into effect. (PSOF ¶ 36). In addition, prior to the

execution of the Letter of Assent - B, Mr. Roth, on behalf of Defendant, entered into an

“Employer’s Bond” which stated in pertinent part:

WHEREAS, the condition of the above obligation is such that the Principal

[JBJ Electric Company, LLC] as a Contractor, has entered into a Collective

Bargaining Agreement in effect this date and amendments thereof with Local

Union 640 of the International Brotherhood of Electrical Workers, providing

among other things for the payment of wages to the Employees of the Principal

and payment of other sums to the I.B.E.W. 640 Apprenticeship and Training

Trust, National Electrical Benefit Fund, I.B.E.W. Local 640 Health and

Welfare Trust Fund, I.B.E.W. Local 640 Pension Trust Fund, as specified in

the agreement; and further providing either in the Collective Bargaining

Agreement or in the Trust Agreement . . . for liquidated damages, penalties,

attorneys’ fees and costs, collection costs, accounting costs, any other

expenses incurred in enforcing the provisions of the Collective Bargaining

Agreement in the collection of wages, benefits, or monies due and owing to the

Employees and/or I.B.E.W. Local 640 and the aforementioned funds and

trusts. 

(PSOF ¶ 30). 

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2

 The Court notes that Defendant’s accompanying statement of facts in support of its

response to Plaintiff’s Motion for summary judgment is not in compliance with LRCiv.

56.1(b), which requires the non-moving party to provide a document addressing each of the

moving party’s separate statement of facts. Rather than submit such a list responding to each

of the Plaintiffs’ statements of fact, Defendant has simply filed its own separate statement

of facts. The Court will review both sets of statements of fact, but Defendant is instructed

to comply with the Local Rule with respect to any such future filings. 

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Despite Mr. Roth’s signature on the Letter of Assent - B, which incorporates by

reference, the Inside Agreement, Defendant challenges its contractual obligation to make

contributions. Specifically, Defendant challenges the circumstances surrounding the Letter

of Assent - B and what Mr. Roth reasonably believed he was agreeing to when he signed the

document. For instance, Mr. Roth states that he signed the Letter of Assent - B, in the

presence of Mr. Speer at his office, so that Stan Todd, an employee of Defendant, could

receive 300 hours of work to maintain his pension. (Defendant’s Statement of Facts

(“DSOF”) ¶¶ 34, 35).2

 According to Mr. Roth, Mr. Todd was in jeopardy of losing his union

pension at the time unless he worked 300 hours on a union job and Mr. Roth signed the

agreement so that Mr. Todd could keep his pension by working the required hours on a union

job. (DSOF ¶ 53, 64). Mr. Roth testified that he did not understand that he was agreeing to

any type of labor agreement when he executed the Letter of Assent - B (DSOF ¶ 65), but that

Mr. Speer instructed Mr. Roth that the Letter of Assent - B was the vehicle by which Mr.

Todd could get his hours. (DSOF ¶ 68). Mr. Roth further states that he did not scrutinize the

contents of the Letter of Assent - B based upon the representations of Mr. Speers (DSOF ¶¶

82, 84) and prior to signing the agreement he did not know the significance of a collective

bargaining agreement and had not been provided a copy of the collective bargaining

agreement or Inside Agreement prior to October 23, 2003. (DSOF ¶¶ 54-56, 72). Mr. Roth

further states that based upon the affirmative representation of Mr. Speers, he believed that

the Letter of Assent - B would only apply to Mr. Todd, Defendant’s only union employee

(DSOF ¶ 62) and that Mr. Roth would have never signed the Letter of Assent - B had it

pertained to his other employees. (DSOF ¶ 63). 

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III. Summary Judgment Standard

A motion for summary judgment may be granted only if the evidence shows “that

there is no genuine issue as to any material fact and that the moving party is entitled to

judgment as a matter of law.” FED. R. CIV. P. 56(c). The Court views the evidence in the

light most favorable to the nonmoving party and draws any reasonable inferences in the

nonmoving party’s favor. See Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995),

cert. denied, 516 U.S. 1171 (1996). A material issue of fact is one that affects the outcome

of the litigation and requires a trial to resolve the differing versions of the truth. S.E.C. v.

Seaboard Corp., 677 F.2d 1301, 1305-06 (9th Cir. 1982). To defeat the motion, the nonmoving party must show that there are genuine factual issues “that properly can be resolved

only by a finder of fact because they may reasonably be resolved in favor of either party.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). Summary judgment is

appropriate against a party who “fails to make a showing sufficient to establish the existence

of an element essential to that party’s case, and on which that party will bear the burden of

proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). 

IV. Analysis 

A. Defendant’s Fraud in the Execution Defense and Declaratory

Counterclaim 

(1) Fraud in the Execution vs. Fraud in the Inducement

In general, courts have recognized a streamlined approach towards recovering

contributions owed under the terms of a collective bargaining agreement. As noted by the

Eighth Circuit, the purpose of such actions under 29 U.S.C. § 1145 is to “simplify actions to

collect delinquent contributions, avoid costly litigation and enhance the actuarial planning

necessary to the administration of multiemployer pension plans.” Cent States, Southeast &

Southwest Areas Pension Fund et al. v. Indep. Fruit & Produce Co., 919 F.2d 1343, 1348

(1990). The Second Circuit in Benson v. Brower’s Moving & Storage, Inc., 907 F.2d 310,

314 (1990) described such actions and the limited defenses available to the employer by

noting in pertinent part:

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[A]n employer may not assert that the union orally agreed not to enforce the

terms of the collective bargaining agreement . . . that the employer was

fraudulently induced to enter into the agreement . . . or that no contract was

formed because of unilateral or mutual mistake of fact . . . . Our research has

disclosed only two defenses recognized by the courts: (1) that the pension

contributions themselves are illegal . . . and (2) that the collective bargaining

agreement is void (not merely voidable) . . . . Thus, once an employer

knowingly signs an agreement that requires him to contribute to an employee

benefit plan, he may not escape his obligation by raising defenses that call into

question the union’s ability to enforce the contract as a whole. 

(citations omitted). 

In the Ninth Circuit, as in other circuits, the defense of fraud in the inducement in

opposing the employer’s obligation to make contributions under a collective bargaining

agreement is not a valid defense. Southwest Administrators, Inc. v. Rozay’s Transfer, 791

F.2d 769, 773 (9th Cir. 1986) (citing Southern California Retail Clerks Union and Food

Employers Join Pension Trust Fund v. Bjorklund, 728 F.2d 1262, 1266 (9th Cir. 1985)). 

Conversely; however, as noted by the Parties, the defense of fraud in the execution of a

collective bargaining agreement between the union and employer is a defense to an action

for contributions. Id. at 774 (citing Operating Engineers Pension Trust v. Gilliam, 737 F.2d

1501, 1503 (9th Cir. 1984)). The difference between the two is that fraud in the inducement

“induces a party to assent to something he otherwise would not have;” whereas, fraud in the

execution “arises where a party executes an agreement ‘with neither knowledge nor

reasonable opportunity to obtain knowledge of its character or its essential terms.’” Id.

(citations omitted). To expand on the defense of fraud in the execution, “he who signs a

document reasonably believing it is something quite different than it is cannot be bound to

the terms of the document.” Gilliam, 737 F.2d at 1504. For instance, “one who signs a

promissory note reasonably believing he only gave his autograph is not liable on the note.”

Id. The difference between the two fraud defenses is perhaps best illustrated by a review of

Ninth Circuit authority.

For instance, in Bjorklund, the employer, who entered a collective bargaining

agreement with the union, asserted that the union representative made a false assurance that

the employer, himself, would be eligible to obtain a pension and that the employer would not

be required to make contributions for the employer’s part-time employees. 728 F.2d at 1263-

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64. However, it turned out that the employer was not eligible for a pension and was required

to make contributions for the part-time employees. Id. The Ninth Circuit rejected the

employer’s argument regarding the union representative’s misrepresentation because the

employer’s defense went directly to the employer’s central motivation for entering the

agreement, which invoked the defense of fraud in the inducement, and thus, as noted above,

was not a valid defense to a claim for contributions under the terms of a collective bargaining

agreement. Id. 

Conversely; in Gilliam, an employer signed a collective bargaining agreement under

the impression that he was only applying to become a member of the union as an owneroperator so that he could operate on a union job site. 737 F.2d at 1504-05. The Ninth Circuit

rejected the trust fund’s action for contributions under the agreement holding that the

employer was not obligated because the employer had reasonably relied on the union’s

representation that the employer was signing a document of a wholly different nature. 

Notably, the union’s agent produced a number of forms that he claimed to be standard forms

for owners-operators and did not tell the employer that any of the forms involved a shortform agreement. In addition, based upon the representations of the union’s agent, the

employer did not read the documents. The Ninth Circuit determined that “[u]nder the

circumstances, [the employer] reasonably and justifiably thought the documents involved

only an application for union membership and [the employer’s] signing of the short-form

agreement did not create a binding collective bargaining agreement.” Id. at 1505. 

In this Court’s view, in light of the authority above, the distinction between the

defenses of fraud in the inducement and fraud in the execution, is whether the employer

reasonably believes it is signing a document different that it actually is, which invokes fraud

in the execution, or whether the employer signs the document believing the terms and

conditions of the agreement are different than what they actually they are, which invokes

fraud in the inducement. 

(2) Fraud in the Execution Related to this Case

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The question presented upon summary judgment, is whether in viewing the evidence

in the light most favorable to Defendant, no reasonable trier of fact could conclude that Mr.

Roth, as representative of the Defendant, reasonably believed he signed the document, i.e.,

the Letter of Assent - B, believing it to be it be something different than it actually was.

Gilliam supra. In this Court’s view, there are factual issues that preclude this Court from

determining, as a matter of law, that Defendant’s fraud in the execution counterclaim and

defense fail as a matter of law. In reviewing the record, it appears that a reasonable trier of

fact could conclude that Mr. Roth signed the Letter of Assent - B reasonably believing that

it was something quite different than it actually was, i.e., a binding collective bargaining

agreement. For instance, according to Mr. Roth, he believed that he was only entering into

an agreement that would allow Mr. Todd to obtain union hours so as to keep his union

pension. Mr. Roth further states he did not believe that he was entering into any type of labor

agreement. (DSOF ¶¶ 53, 64, 65). In addition, Mr. Roth asserts that his belief of such was

based upon the representations of the union’s agent, Mr. Speer. Specifically, Mr. Roth

contends that Mr. Speer instructed him that the Letter of Assent - B was the vehicle by which

Mr. Todd could keep his union pension. (DSOF ¶ 68). Moreover, Mr. Roth asserts that prior

to signing the Letter of Assent - B, he did not receive a copy of the collective bargaining

agreement and based upon the representations of Mr. Speer did not scrutinize the contents

of the Letter of Assent - B. (DSOF ¶ 84). 

These representations of fact by Defendant implicate circumstances similar to those

presented in Gilliam. As noted above, in Gilliam, the employer reasonably believed, based

primarily on the conduct and representations of the union agent, that it was only applying for

union membership and not entering into any formal collective bargaining agreement. Gilliam,

737 F.2d at 1504-05. The facts and circumstances of Gilliam were described as unusual;

however, they are not unlike those presented here. For instance, similar to the employer’s

position in Gilliam, Defendant contends that Mr. Roth reasonably believed he was entering

into an agreement to allow Mr. Todd to gain union hours, not to bind Defendant to any type

of collective bargaining agreement. While, the Court agrees with the Plaintiff that

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3

 Defendant’s contentions as to the terms and conditions of the agreement such as

whether only Mr. Todd or all other of Defendant’s employees would be bound to the

agreement do not implicate the defense of fraud in the execution. (DSOF ¶¶ 62, 63, 69), See

Rozay’s Transfer, 791 F.2d at 774-775 (rejecting fraud in execution defense by employer

based upon alleged misrepresentation from union agent regarding effect of collective

bargaining agreement where employer was fully aware that document that was signed was

a collective bargaining agreement). 

4

 For instance, the finder of fact may have to weigh such factors as Mr. Roth’s

background as a business owner, educational experience and opportunity to review the

agreement to determine whether he possessed the knowledge or reasonable opportunity to

obtain knowledge of the agreement’s character or terms. Rozay’s Transfer, 791 F.2d at 774.

- 9 -

Defendant’s assertions regarding the terms and conditions of the agreement, such as whether

only Mr. Todd or other employees would be bound by the agreement, amounts to a defense

of fraud in the inducement, Defendant’s arguments regarding Mr. Roth’s beliefs as to the

nature of the agreement as a whole implicates the defense of fraud in the execution and is

properly presented as a defense.3

 

In making its determination, the Court notes that the validity of Defendant’s fraud in

the execution defense is highly factual and raises questions to be resolved by the finder of

fact. For instance, whether Mr. Roth reasonably believed he was signing a document

different that it actually was will require the finder of fact to weigh the relevant evidence, i.e.,

the plain terms of the Letter of Assent - B and circumstances surrounding the agreement as

well as credibility determinations.4

 Such factual inquiries requiring evidentiary evaluation

by the trier of fact are not uncommon in collection actions such as this. See Gilliam, 737

F.2d at 1502 (noting that after hearing evidence, the district court ruled that no collective

bargaining agreement existed); Operating Engineers Pension Trust v. Cecil Blackfoot

Service, Inc., 795 F.2d 1501, 1503 (9th Cir. 1986) (following a two-day bench trial, the

district court entered judgment for trusts rejecting employer’s fraud in execution defense);

Rozay’s Transfer, 791 F.2d at 772 (after denying cross-motions for summary judgment,

district court, after one-day bench trial, determined trust funds were entitled to contributions

under collective bargaining agreement); Operating Engineers Pension Trust v. Giorgi, 788

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F.2d 620 (9th Cir. 1986) (reversing district court which held, after trial, that subcontractor was

not bound by collective bargaining agreement). 

Accordingly, the Court will deny Plaintiff’s Motion for summary judgment with

respect to Defendant’s fraud in the execution declaratory counterclaim and affirmative

defense. 

(B) Termination Date of Collective Bargaining Agreement 

In pursuit of summary judgment, Plaintiffs seek a ruling from the Court regarding the

termination date of the collective bargaining agreement between Plaintiff and Defendant.

As noted above, the Court will deny Plaintiffs’ request for summary judgment on

Defendant’s fraud in the execution counterclaim; however, assuming after presentation of

evidence at trial it is determined that the Defendant’s counterclaim fails, then a determination

regarding the applicable termination date is necessary to calculate damages. 

Plaintiffs note the plain language of the Inside Agreement or collective bargaining

agreement provides that the agreement will terminate on June 20, 2005. (PSOF ¶ 44). Based

upon this language, Plaintiffs contend that June 20, 2005, is clearly the termination date of

the Parties’ agreement. However, based upon this Court’s review of the record, the

agreement also provides that “[e]ither party . . . desiring to change or terminate this

Agreement must provide written notification at least ninety (90) days prior to the expiration

date of the Agreement . . . .” (PSOF ¶ 44). Notably, on May 5, 2004, Defendant issued a

letter requesting that the agreement be terminated, thus suggesting cancellation of the

agreement (Id.). While the Defendant did not expressly respond to the Plaintiffs’ argument

regarding a June 20, 2005, termination date, the Court, based upon Defendant’s May 5, 2004

written request to terminate, cannot find, upon summary judgment, that June 20, 2005 is the

applicable termination date. Absent a more sufficient basis, the Court will deny Plaintiffs’

request for summary judgment on this issue. 

V. Summary

The Court finds there presently to be an issue of fact surrounding Defendant’s fraud

in the execution declaratory counterclaim and affirmative defense to Plaintiffs’ claims for

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contributions pursuant to the terms of the Letter of Assent - B and incorporated collective

bargaining agreement. In the viewing the evidence in the light most favorable to the

Defendant, there is a factual issue regarding whether Defendant reasonably believed it was

entering into an agreement of a different nature than a collective bargaining agreement

requiring contributions. Similarly, the Court will deny Plaintiffs’ request for summary

judgment on the applicable termination date. 

Accordingly,

IT IS HEREBY ORDERED denying Plaintiffs’ Motion for Summary Judgment.

(Dkt.#92).

IT IS FURTHER ORDERED setting this matter for a status hearing on October 9,

2007, at 4:30 p.m. at which time a trial date will be addressed.

DATED this 18th day of September, 2007.

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