UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LABORERS’ PENSION FUND; LABORERS’

WELFARE FUND OF THE HEALTH AND 

WELFARE DEPARTMENT OF THE 

CONSTRUCTION AND GENERAL 

LABORERS’ DISTRICT COUNCIL OF 

CHICAGO AND VICINITY; and JAMES S. 

JORGENSEN, Administrator of the Funds,

 Plaintiffs,

 v.

NOVAK AND SONS PAVING, INC., an Illinois 

corporation, d/b/a NOVAK & SONS PAVING, 

INC., also d/b/a NOVAK PAVING, INC.; 

STONEHILL LANDSCAPING, INC., an Illinois 

corporation, d/b/a GREENVIEW 

MAINTENANCE; MAUREEN NOVAK, 

individually, and d/b/a GREENVIEW 

MAINTENANCE; and JAMES E. NOVAK, 

individually, and d/b/a GREENVIEW 

MAINTENANCE,

 Defendants.

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 No. 12 cv 4254

 Magistrate Judge Susan E. Cox

ORDER

Plaintiffs, Laborers’ Pension Fund; Laborers’ Welfare Fund of the Health and Welfare 

Department of the Construction and General Laborers’ District Council of Chicago and Vicinity; 

and James S. Jorgensen, Administrator of the Funds (collectively, the “Funds”), sued Defendants, 

Novak and Sons Paving d/b/a Novak & Sons Paving, Inc., and also d/b/a Novak Paving, Inc.

(“N&S”); Stonehill Landscaping, Inc. d/b/a Greenview Maintenance (“Stonehill”); Maureen 

Novak, individually (“Maureen”) and d/b/a Greenview Maintenance; and James E. Novak,

individually (“James”) and d/b/a Greenview Maintenance (collectively, “Defendants”), to recover 

allegedly delinquent contributions to the Funds pursuant to the Employee Retirement Income 
2

Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. §§ 1132(e)(1) and (2) and 1145, Section 

301(a) of the Labor Management Relations Act (“LMRA”) of 1947 as amended, 29 U.S.C. § 

185(a), and 28 U.S.C. § 1331. This matter comes before the Court on the Funds’ Motion for 

Summary Judgment [Dkt. 119]. For the reasons stated below, the Court denies the Funds’ Motion

for Summary Judgment.

I. Factual Background

The corporate defendants in this matter, N&S and Stonehill, performed commercial and 

residential construction work including sealcoating, paving, patching, resurfacing, excavating, sawcutting, striping, and stone work. [Funds’ Statement of Material Facts (“FSOF”), ¶¶ 18, 33.] Some 

N&S and Stonehill work was performed by union employees. [Id. at ¶ 23, 34.] The applicable 

collective bargaining agreement (“CBA”) and Trust Documents obligate the corporate Defendants

to make contributions “for each hour worked” on behalf of its employees covered by the CBA for 

pension benefits, health and welfare benefits, and/or benefits for the training fund. [Id. at ¶ 13.] 

The documents also require the corporate Defendants to submit monthly reports regarding CBAcovered-employees and the amount of contributions to be remitted to the Funds on behalf of each 

covered employee. [Id.] The Funds then collect employer contributions from the wages of 

employees in payment of union dues. [Id. at ¶ 4.]

In the instant matter, the Funds undertook an audit of the corporate Defendants’ books 

and records to determine compliance with the Funds’ reporting and contribution procedures, and 

to calculate whether there were any amounts owing to the Funds.1 [Dkt. 120, p. 8.] The Funds’

 1 Defendants have objected to the term ‘audit’ to describe this process. While the Court employs that term 

throughout this opinion, the Court finds compelling the Seventh Circuit’s comments concerning an audit 

conducted in a similar matter, Trustees of Chicago Plastering Inst. Pension Trust v. Cork Plastering Co., 570 F.3d 890 

(7th Cir. 2009). In Cork Plastering, the court found:

[t]he data underlying the [auditing firm’s] report were [] derived from [the company’s] payroll 
3

initial audit was undertaken only on corporate Defendant N&S, and covered the time period of 

January 1, 2008 through January 31, 2011.2 [FSOF, ¶ 59.] This audit period was later extended to 

January 1, 2008 through December 31, 2014, and covered both corporate Defendants, N&S and 

Stonehill (“Second Audits”). [Id.] As it appears that neither party has attached the Second Audits 

to any document filed in this case, the Court cannot tell when the Second Audits were issued. 

The Second Audits for both corporate Defendants were subsequently revised based on 

challenges submitted by the Defendants (“Revised Audits”). [Id. at ¶ 61.] As part of the process 

that led to the Revised Audits, the Defendants submitted Declarations from some, but not all, of 

the individuals who received non-payroll payments analyzed on the audits. [Id.] Also, “[d]uring the 

course of this litigation and audit process [the Defendants] provided the names and address of all 

employees of Stonehill” to the Funds.3 [Dkt. 136-14; Dkt. 136-1, ¶ 23.] After consideration of the 

challenges raised by Defendants, the Revised Audits were issued on June 6, 2016. [Dkt. 122-1, 

¶ 10, pp.7-8; Dkt. 129, pp. 42-71]. The Revised Audits are the basis for the Funds’ calculation of 

damages in this case. [Dkt. 120, p. 2.] The total audit liability reflected in the Revised Audits is 

$663,684.57. [FSOF, ¶¶ 63-65, 67, 68, 70.]

Under each of the audits and revisions mentioned above, the auditor, Timothy Kalnes, 

 

records. But the report’s conclusions as to what [the company] owed [the Funds] based on that 

data were driven by a set of procedures or assumptions agreed to by [the auditor] and its clients. 

The report was not an audit opinion in the sense that it expressed a professional judgment 

about what [the company] owed the plaintiffs; [the auditor] did not vouch for the validity of the 

assumptions employed but merely tabulated what the company might owe assuming the validity 

of the assumptions.

570 F.3d at 899. The Court does not, nor does it need to, reach a conclusion as to whether the Independent 

Accountant’s Reports in this matter meet a technical definition of an audit.

2 The Independent Accountant’s Report indicates the initial audit was issued on September 30, 2011. [Dkt. 1, 

pp. 16-17.]

3 Contrary to the Funds’ assertions [Dkt. 143, n.1], Maureen’s affidavit does not have to be notarized to be 

valid, as it has been certified by verification under the penalties of 735 ILCS 5/109, where any person who 

makes a false statement under said certifications shall be guilty of a Class 3 felony. Maureen’s affidavit also 

satisfies the personal knowledge requirements of F.R.C.P. 56(c)(4).
4

applied what is known as the “Chicago 10” procedure to all payments made to any employee 

where the employee’s hourly rate is unknown. [Funds’ Supplemental Statement of Material Facts 

(“FSSOF”), ¶¶ 2, 11.] Although neither party explains well how the Chicago 10 procedure 

operates (e.g., the Funds never even mention this key term in their opening brief), the Court will 

endeavor to explain it as follows. When reviewing payroll records during an audit, the auditor may 

find that an employee will receive more than one pay rate for different job functions under the 

CBA; or an employee will receive a payment outside of the normal payroll such as a bonus or a 

cash payment/reimbursement (i.e., a non-payroll payment); or an employee will perform some 

work covered by a CBA and some that is not. Non-payroll payments can create a problem for 

auditors because there is typically no designation of whether the payment was issued for covered or

non-covered work under the relevant CBA and, thus, the auditor will not be able to tell what work 

was being performed at what rate and if contributions are owed to any ERISA fund based on that 

work. 

To compensate for this issue, an auditor attempting to determine if a union employer 

made proper ERISA contributions will assume that, unless otherwise specified, any individual who 

receives a non-payroll payment from the employer is a laborer performing work covered under an 

applicable CBA. For example, if an individual receives a non-payroll payment of $100 and her 

hourly rate cannot be determined for such payment, an auditor applying the Chicago 10 would 

assume this payment was made to the employee for CBA-covered-work she performed at an hourly 

rate of $10.00, thus concluding the employee worked 10 hours in exchange for that $100 payment; 

the employer would then potentially be liable to the ERISA funds for any unpaid contributions 

based on these 10 hours worked by the employee. 

However, if the hourly rate applied by the auditor was increased, the number of hours for 
5

which an employer would potentially be liable to the funds would shrink. For example, if a rate of 

$20.00 an hour were assumed by the auditor for that same $100 non-payroll payment, the auditor

would conclude the employee worked 5 hours in exchange for that $100 payment, and thus, the 

employer would potentially be liable for any unpaid contributions based on these 5 hours worked 

by the employee. Hence, an increase in the hourly rate applied by the auditor would necessarily 

reduce the number of hours for which any audited employer would potentially owe contributions.

Here, however, the Funds have placed at issue a fact they find material to this matter, 

bearing on this exact issue: the existence of the “Chicago 18” procedure.4 Specifically, the Funds’

Supplemental Material Fact No. 16 states that “[o]n or about November 9, 2015, the Funds later 

revised the Chicago 10 procedure by amending the hourly wage rate assumption from $10.00 an 

hour to $18.00 an hour.” [FSSOF, ¶ 16.] The Kalnes Affidavit and its exhibits [Dkt. 147, pp. 18-

29] submitted by the Funds shed no light on the effective dates of the Chicago 18 procedure, 

although Kalnes does affirm that under the revised procedure “auditors are now to reasonably assume

that those payments were made to the employee for work performed at an hourly rate of $18.00.”

[Id., p. 20, ¶ 9 (emphasis added).] Although the Revised Audits were issued June 6, 2016, roughly 

seven months after the Chicago 18 procedure was implemented (November 9, 2015), the Chicago 

18 rate was not applied to the Revised Audits.

It appears that the Kalnes Affidavit, and the Funds’ Supplemental Material Fact No. 16, 

both submitted as part of the Funds’ Reply, might have been the first inkling given to Defendants 

that the Chicago 10 procedure had been revised, as Defendants brief largely centers around 

whether $10.00 an hour was a reasonable assumption made by the auditor.5 Curiously, though, 

 4 In keeping with the parlance of this case, the Court will refer to this revised procedure as the “Chicago 18.”

5 On this point, Defendants included deposition testimony of Howard Levinson [Dkt. 136-3], a principal of 
6

neither Party discusses the Chicago 18 in its briefs.

II. Standard of Review

Summary judgment is proper where “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 

material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. 

P. 56 (c). In determining whether there is a genuine issue of fact, the Court “must construe the 

facts and draw all reasonable inferences in the light most favorable to the nonmoving party.” Foley 

v. City of Lafayette Indiana, 359 F.3d 925, 928 (7th Cir. 2004). The party seeking summary 

judgment has the burden of establishing the lack of any genuine issue of material fact. See Cellotex 

Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L. Ed. 2d 265 (1986). A genuine issue of 

material fact exists if “the evidence is such that a reasonable jury could return a verdict for the 

nonmoving party.” Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L. Ed. 2d 

202 (1986). Summary judgment is proper 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 the party will bear 

the burden of proof at trial.” Cellotex, 477 U.S. at 322. “The mere existence of a scintilla of 

 

Calibre, the auditing company used by the Funds in this matter. The Funds argued for its inadmissibility as the 

deposition comes from a different case. If Defendants had tried to sustain their burden of establishing the 

admissibility of the Levinson testimony instead of failing to even note the deposition was taken in a different 

case (albeit with the same plaintiffs as the instant matter, who had an opportunity to question Mr. Levinson 

about the Chicago 10), the Court might have been inclined to consider the testimony. See Wallace v. City of 

Tarpon Springs, 2007 WL 128839, at *3 (M.D. Fla. Jan. 12, 2007) (“[C]ourts have found that the requirement that 

the parties be the same in both actions is not controlling in determining admissibility under [Fed. R. Civ. Pro.] 

32(a)(4). The main questions as to the admissibility of a deposition under Rule 32(a)(4) are whether the 

underlying issues are the same and whether the party opposing the deposition’s admission had adequate motive 

and opportunity to develop the witness’ testimony as relevant to the case at hand.”). However, the burden of 

proving that deposition testimony is admissible falls on the proponent of the testimony. Hughes v. City of Chicago, 

673 F. Supp. 2d 641, 652 (N.D. Ill. 2009) (citing Wallace, 2007 WL 128839, at *3-4 (granting motion to strike 

deposition testimony of witness “never referenced in this case through Rule 26 disclosures or in response to any 

discovery request,” whose “name was first referenced in Plaintiffs’ motion for summary judgment”)). Even if 

Defendants made persuasive admissibility arguments, they also have the unexplained failure to disclose Mr. 

Levinson in their discovery responses. Therefore, irrespective of the fact this decision hinges on FSSOF ¶ 16, the 

Court is unable to consider Mr. Levinson’s deposition testimony about the Chicago 10 procedure.
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evidence in support of the [non-movant’s] position will be insufficient; there must be evidence on 

which the jury could reasonably find for the [non-movant].” Anderson, 477 U.S. at 252.

III. Discussion

A. The “Chicago 10” v. the “Chicago 18”

Although the Court had the burdensome task of sorting out the details of the wordy mire 

submitted by Defendants,6 the Court believes that there is a genuine issue of material fact as to the 

existence and extent of Defendants’ liability to the Funds as revealed by the Revised Audits such 

that summary judgment would be inappropriate.

ERISA’s recordkeeping and reporting requirements “require[] an employer to maintain 

time records or similar records of hours worked by employees in order to permit ERISA plans to 

calculate benefits due and to fulfill their reporting duties.” Chicago Steel & Crane, Inc. v. Structural 

Ironworkers Local No. 1 Welfare Fund, No. 00 C 1615, 2002 WL 1610980, at *5 (N.D. Ill. July 22, 

2002) (referencing 29 U.S.C.A. § 1059). In matters such as the instant one, “[w]here trust funds 

attempt to collect delinquent employer contributions, courts have imposed a presumption in favor 

of the funds regarding proof of the extent of damages.” Chicago Steel, 2002 WL 1610980, at *5. 

Nevertheless, Defendants are not entirely correct that it is solely the Funds’ burden to show the 

auditor’s assumptions were reasonable under the circumstances. Rather, 

[i]f the funds establish that the employer has failed to make contributions for 

employees covered under the collective bargaining agreement and they also 

establish a breach of section 1059 (failure to keep accurate employee records), then

the Funds need only produce sufficient evidence to show the amount and extent of 

that work as a matter of just and a reasonable inference, which, in turn, shifts to 

the employer the burden to produce evidence of the precise amount of work 

 6 In its review of the summary judgment materials submitted to the Court, the Court struggled mightily with 

the question of whether to exercise its discretion to strike certain unsupported facts cited by Defendant. 

Ultimately, the Court has not exercised its discretion to do so here. Any stricken facts would not have had an 

impact on the Court’s analysis, as the Court’s decision hinges on the uncertainty of whether recoverable damages 

exist in the instant matter.
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performed or evidence to negate the reasonableness of the inferences to be drawn 

from the Funds’ evidence.

Id. (citations and signals omitted). 

However, before this burden shifting-analysis becomes applicable, “the Funds must prove 

the fact of damage.” Id. (citing Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 688 (1946) (the

“rule applies only to situations where the fact of damage is itself uncertain.”)). In this regard, “in a 

case where the fact of damage or injury is an element of the claim, there can be no liability without 

proof that there is injury or damage.” Patrick Schaumburg Automobiles, Inc. v. Hanover Ins. Co., 452 F. 

Supp. 2d 857, 866 (N.D. Ill. 2006). This is so because “if there is a question of fact as to the 

existence of any damages, summary judgment should not be granted. Rule 56(c) contemplates a 

procedure which clears away all matters except a prove-up or computation of damages after the 

existence of some recoverable damages is established.” Id. at 866-67 (citing Berman v. Thomson, 45 

F.R.D. 342, 344 (N.D.Ill.1968) vacated on other grounds, 312 F.Supp. 1031 (N.D.Ill.1970) (citing 

to 6 Moore, Federal Practice, ¶ 56.17 at p. 2529 in denying summary judgment on liability where 

defendant’s liability hinged on whether there were recoverable damages) (signals omitted)).

The Court finds doubt as to the existence of recoverable damages in the instant matter 

because the Chicago 18 is a material fact in this case. Yet Defendants were not given the benefit of 

this higher wage assumption in the Revised Audits, despite the Revised Audits being issued some

seven months after the Chicago 18 procedure was implemented. Application of the Chicago 18

would undoubtedly change the entire landscape of the Revised Audits and, thus, the existence of 

any damages is in doubt as the matter now sits before the Court; neither party has done the math 

and therefore the Court is unable to say whether any damages would exist under the revised wage 

benchmark of the Chicago 18. In essence, this is a rather fundamental application of the mandate 
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to “construe the facts and draw all reasonable inferences in the light most favorable to the 

nonmoving party.” Foley, 359 F.3d at 928. The Court cannot grant summary judgment because of 

the genuine issue of material fact as to the existence of Defendants’ liability to the Funds as 

revealed by the Revised Audits.

B. Additional Errors in the Revised Audits

Although the Court could end its analysis there, it appears there are errors in at least five

of the individuals included within the Revised Audits. Basically, there are five individuals included 

within the audits who may not have been employees of the corporate Defendants. These 

individuals are: Marilyn Barton (attorney), Daniel Martinez (outside mechanic), Kevin O’Kelley 

(outside mechanic), Roger Miller (paid a commission for a referral), and Dennis Bradley (outside 

electrician). [Dkt. 136-1, pp. 6-7, ¶¶ 28-31.] The Parties do not discuss whether information 

relating to these outside individuals was submitted to rebut either the first or second audits, but 

Maureen does aver that “[d]uring the course of this litigation and audit process we provided the 

names and address of all employees of Stonehill.” Dkt. 136-1 ¶23. This likely should have been 

enough to put the auditor on notice that these individuals were not Stonehill employees and that, 

if nothing else, further inquiry was required before merely assessing them at the Chicago 10 rate.

Additionally, Maureen affirms personal knowledge of the fact that Barton, Martinez, 

O’Kelley, Miller, and Bradley were not employees of the Defendant corporations and further 

affirms what functions they were paid to perform for Defendants. [Dkt. 136-1, pp. 6-7, ¶¶ 28-31.] 

Although these paragraphs of Maureen’s affidavit are not independently supported with outside 

documentation, some of this documentation (specifically, Barton’s ARDC attorney registration 

record) is attached as an exhibit to Defendants’ Statement of Additional Material Facts [see Dkt. 

136-5]. However, even without cites in Maureen’s affidavit to this documentation, the Court is 
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convinced that Maureen’s personal knowledge as the “shareholder and the Vice-President, 

Treasurer and Secretary of Novak and Sons Inc.” [Dkt. 136-1, ¶1], “sole shareholder 

and...Secretary of Stonehill Landscaping, Inc.” [Dkt. 136-1, ¶10], and as an individual who signed 

checks for both N&S and Stonehill [FSOF, ¶¶ 29, 39] is enough to support the affirmations of 

Paragraphs 28-31 of her Affidavit. In short, the Court is satisfied Maureen knows who she hired 

and why.

However, although Defendants argue they made challenges to the audit procedure relative 

to the above, and that that “these challenges were rejected” as to the attorney, mechanics, 

electrician, and commissions paid out [Dkt. 133, p. 4], Defendants fail to point to any fact 

supporting this assertion.7 The Court simply cannot tell (from either Party’s papers) when, how, 

and/or if these challenges were made during the actual audit process. 

“In considering a motion for summary judgment, this court is not required to scour 

the record in search of evidence to defeat the motion; the nonmoving party must 

identify with reasonable particularity the evidence upon which the party relies.”

Pleniceanu v. Brown Printing Co., No. 05 C 5675, 2007 WL 781726, at *7 (N.D.Ill. 

Mar.12, 2007) (citing Johnson v. Cambridge Indus., Inc., 325 F.3d 892, 898 (7th 

Cir.2003)); see also, Estate of Moreland v. Dieter, 395 F.3d 747, 759 (7th Cir.2005) 

(“We will not scour a record to locate evidence supporting a party’s legal 

argument.”); Knapp v. County of Jefferson, No. 06 CV 4028, 2007 WL 496396, at *1 

(S.D.Ill. Feb. 13, 2007) (denying summary judgment where defendant’s brief 

“contains no facts section and ... fail[s] to point to the relevant portions of the 

record to establish the facts of this case”).

Bridgeview Health Care Ctr. Ltd. v. Clark, 2011 WL 4585028, at *2 (N.D. Ill. Sept. 30, 2011). 

 7 Defendants also assert they “challenged the mechanics, the attorney, the electrician, the office employees 

and the snow plowing activity. These challenges were rejected” [Dkt. 133, p. 7], but again fail to cite to the record 

in support of when or how these challenges were made and/or rejected, as to either the individuals the Court 

has already discussed or the office employees/snow plowing activity. Furthermore, as to the office employees, the 

individual Defendants’ affidavits contradict each other as to the number of office staff employed by Stonehill. 

The Court finds it baffling James Novak would either not know or fail to affirm that his daughter worked full 

time in the Stonehill office as Maureen states. Compare the Affidavit of Maureen Novak, ¶ 24 [Dkt. 136-1, p. 6] 

with the Affidavit of James E. Novak, ¶ 16 [Dkt. 136-1, p. 2-3]. The Court need not analyze at this juncture 

whether this is an egregious drafting error or something more nefarious.
11

Therefore, while the Court need not scour the record to help Defendants support their arguments 

in this case, the Court is nevertheless concerned that these five (at a minimum) individuals likely 

should have not have the Chicago 10 (or Chicago 18 as the case may be) procedure applied to 

payments made to them as Maureen’s affidavit and Defendants’ supporting documentation 

indicate these individuals were not laborers covered by any applicable CBA. Again, however, the 

Court is unable to and makes no finding as to whether these challenges were made at the 

appropriate audit process juncture.

Although the Court has expressed concern about several probable errors in the Revised 

Audits, the Court’s denial of summary judgment hinges on the existence of a genuine issue 

material fact concerning liability in this matter, which hinges on damages. The evidence before the 

Court concerning the Chicago 18 is such that a reasonable jury could return a verdict for the 

Defendants. See Anderson, 477 U.S. 242. Thus, denial of summary judgment is appropriate in the 

instant matter.

IV. Conclusion

For the foregoing reasons, the Court denies the Funds’ Motion for Summary Judgment.

Enter: 3/23/2017

_____________________________________

U.S. Magistrate Judge, Susan E. Cox