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Road Sprinkler Fitters Local Union No. 669 v. CCR Fire Protection, LLC

United States District Court, M.D. Louisiana

September 27, 2019

ROAD SPRINKLER FITTERS LOCAL UNION NO. 669, U.A., AFL-CIO
v.
CCR FIRE PROTECTION, LLC, ET AL

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          JOHN W. deGRAVELLES, UNITED STATES DISTRICT JUDGE

         INTRODUCTION AND RULING

         1. In this suit, Plaintiff Road Sprinkler Fitters, Local Union No. 669, U.A., AFL-CIO demands specific performance of what it contends to be a binding contract settling a labor dispute between it and CCR Fire Protection, LLC.[1]

         2. This matter was tried to the Court on May 14-15, 2019. The parties submitted post-trial Proposed Findings of Fact and Conclusions of Law on August 5, 2019.[2] On August 12, 2019, each party submitted reply briefs in response to the other’s proposed findings and conclusions.[3] The matter was then submitted.

         3. In making the following findings of fact and conclusions of law, the Court has considered the record as a whole. The Court observed the demeanor of the witnesses who gave live testimony and has carefully weighed their testimony and credibility in determining the facts of this case and in drawing conclusions from those facts. The Court has also carefully reviewed the deposition testimony and exhibits introduced into evidence. The Court has reviewed and considered the briefs and arguments of counsel.

         4. All findings of fact contained herein that are more appropriately considered conclusions of law are to be so deemed. Likewise, any conclusion of law more appropriately considered a finding of fact is to be so classified.

         5. For the reasons which follow, the Court finds that Plaintiff has failed to prove its entitlement to the relief sought. Therefore, judgment is rendered in favor of defendants CCR Fire Protection, LLC and Quick Response Fire Protection, LLC and against Plaintiff Road Sprinkler Fitters, Local Union No. 669, U.A., AFL-CIO, dismissing its claims with prejudice.

         THE PARTIES

         6. Plaintiff, Road Sprinkler Fitters, Local Union No. 669, U.A., AFL-CIO (the “Union” or “Plaintiff”), is a national labor organization.[4]

         7. Defendant CCR Fire Protection, LLC (“CCR”) is a limited liability company organized under the laws of Louisiana.[5]

         8. Defendant Quick Response Fire Protection, LLC (“Quick Response”), is a limited liability company organized under the laws of Louisiana.

         9. Defendant Earl Barnett was dismissed for Plaintiff’s failure to state a claim against him for which relief could be granted.[6] Defendants Nilesh Patel, Rajendra Bhakta, Roseal Rodriguez, J.R. and Theresa Rodriguez were dismissed on summary judgment.[7]

         BACKGROUND

         10. Defendant CCR was formed by Nilesh Patel (“Patel”), Rajendra Bhakta (“Bhakta”), and Roseal “J.R.” Rodriguez (“Mr. Rodriguez”) in 2009 to engage in the business of installing and maintaining fire protection systems.[8]

         11. The membership interests of CCR were owned by Mr. Rodriguez, Patel, Bhakta and Kennon Bridges (“Bridges”).[9]

         12. Mr. Rodriguez owned a 40% share in CCR. Patel and Bhakta each owned a 26% share, and Bridges owned 8%.[10]

         13. As the President of CCR, Mr. Rodriguez was in charge of managing CCR from its inception until it closed.[11] He had authority over the day-to-day operations of CCR, which included the authority to hire and fire CCR’s employees.[12] Sometimes, however, he had to answer to Patel and Bhakta in connection with the operation of CCR.[13]

         14. Mr. Rodriguez’s wife, Theresa Rodriguez (“Mrs. Rodriguez”), was, at all material times, the Office Manager for CCR.[14] Her responsibilities included clerical work, such as billing, contracts, and payroll.[15] She was not an owner or officer of CCR.[16]

         15. In May 2013, CCR entered into a collective bargaining agreement (“CBA”) with the Union, pursuant to which CCR agreed, inter alia, to be bound by the terms of the 2013-2016 National Agreement between the Union and the National Fire Sprinkler Association, Inc. (“NFSA”).[17] The CBA covered CCR’s sprinkler fitter employees.[18]

         PROCEEDINGS BEFORE THE NLRB

         16. In June 2014, CCR attempted to repudiate the CBA by sending a letter to the Union, claiming that the CBA was “null and void.”[19]

         17. The Union objected, and on August 8, 2014, filed unfair labor practice (“ULP”) charges against CCR with the National Labor Relations Board, Region 15 (“NLRB” or “Board”), alleging multiple violations of the National Labor Relations Act (the “NLRA”), including CCR’s failure to make payments to various union benefit funds as required by the CBA, as well as its failure to remit work assessment dues to the Union as required by the CBA.[20]

         18. The NLRB issued a Complaint against CCR on September 30, 2015 alleging multiple violations of the NLRA.[21] The Complaint alleged, inter alia, that CCR had unlawfully solicited and assisted employees in quitting the Union, unilaterally reduced wages to less than what was required by the CBA, and discontinued contributions to the benefit funds.[22] This Complaint was accompanied by a hearing notice.[23]

         19. The hearing was originally scheduled for a date in January 2016, in New Orleans, Louisiana.[24]

         SETTLEMENT NEGOTIATIONS AND PUTATIVE SETTLEMENT

         20. On January 19, 2016, Mrs. Rodriguez sent an email to Union attorney Natalie Moffett (“Moffett”) requesting a continuance of the Board hearing.[25] Moffett, on behalf of the Union, agreed to continue the hearing by three weeks to February 16, 2016[26], as long as Mrs. Rodriguez agreed to meet with another Union attorney, William Osborne (“Osborne”) and Union Business Agent Anthony “Tony” Mr. Cacioppo (“Cacioppo”) for an off-the-record settlement discussion on Sunday, January 24, 2016.[27]

         21. On January 24, 2016, Mrs. Rodriguez met with Osborne and Cacioppo to discuss settlement of the NLRB case against CCR.[28] Mrs. Rodriguez testified that in that meeting, Osborne “was told about the IRS lien[.]”[29] She further testified that Osborne proposed terms of settlement, which included payment by CCR of $450, 000 for unpaid Union benefit contributions.[30]

         22. On January 26, 2016, Mrs. Rodriguez sent an email to Osborne and Moffett requesting more information about the settlement.[31]

         23. On February 15, 2016, Osborne responded by email to Mrs. Rodriguez; Moffett was copied.[32] In the email, Osborne proposed terms of settlement, which included an agreement by CCR to pay “$450, 000 payable in monthly installments over 8 years” and to “remain bound to the current and any successor agreements with Local 669 for the same term.”[33]

         24. That same day, Mrs. Rodriguez responded by email to Osborne and Moffett and posed “[q]uestions from the owners” of CCR, which included the following: “What if the IRS decides that we are not a viable company and decides we need to close?”[34]

         25. Moffett testified that, as of the date of this email, she was aware that CCR had an IRS debt of over $1, 000, 000.[35] She also understood Mrs. Rodriguez to be asking on behalf of CCR’s owners “what would happen if the IRS decided they [CCR] were not a viable company.”[36] Moffett further testified that, at this point in time, she was aware that if someone was in trouble with the IRS, the IRS was probably going to get its money first, [37] that if the IRS had a tax lien against someone, the IRS was going to recover its money, [38]and that an IRS tax lien takes precedence over all other encumbrances.[39]

         26. Likewise, Cacioppo testified that he was aware, a few days before February 17, that CCR “owed . . . money to the IRS.”[40]

         27. The NLRB trial began on February 17, 2016 in New Orleans, Louisiana.[41]

         28. At the trial, CCR was represented by Mr. and Mrs. Rodriguez in person and by Patel who was participating by telephone.[42] CCR was not represented by legal counsel as Mr. and Mrs. Rodriguez were not attorneys.[43]

         29. Moffett and Cacioppo were present for the Union.[44] Ms. Caitlin Bergo and Mr. Beauford Pines were present for the Board.[45]

         30. At the beginning of the hearing, the Union and CCR resumed settlement negotiations.[46]These negotiations lasted for a couple of hours.[47] The NLRB Administrative Law Judge (“ALJ”) did not participate in and was not present for these negotiations.[48]

         31. Much of what was discussed during these negotiations is not disputed. The issue of CCR’s existing tax debt to the IRS was discussed.[49] Moffett testified that Mr. and Mrs. Rodriguez “mentioned an IRS debt” and discussed the fact that “the IRS lien [had] an effect on the Company’s cash on hand.”[50] Likewise, Cacioppo testified that both Mr. and Mrs. Rodriguez informed him that CCR owed the IRS some money.[51]

         32. What is hotly disputed is whether, during these negotiations, Mr. and Mrs. Rodriguez told the Union’s representatives that a condition of the settlement was that the IRS would have to approve the settlement before it would become binding, and whether the Union agreed to this condition. This issue is taken up in another section of the ruling.

         33. Following these negotiations, CCR entered into a settlement of the NLRB Complaint against it.[52] For sake of convenience, the Court will refer to this as the “Settlement Agreement” although the main issue in this case is whether this agreement is binding and enforceable.

         34. The terms of the Settlement Agreement were put on the record before the NLRB ALJ by Moffett[53] and were specifically approved on the record by CCR before the NLRB ALJ.[54]There is a dispute as to whether the terms had been presented to and reviewed by CCR’s co-owners, Patel and Bhakta, two days earlier.[55] The Court finds it unnecessary to resolve this dispute.

         35. Specifically, Moffett read into the record the following terms:

“CCR Fire Protection will pay $450, 000 in monthly installments over eight years to the Union and Union benefit funds with a down payment in an amount to be agreed upon by the parties at a later date.
There will be a confession of judgment in the federal court case related to the unpaid benefit funds.
CCR will mail a notice to employees that I understand will be attached here and read into the record.
CCR will continue to recognize and bargain with the Union as its Section 9(a) bargaining representative of the CCR employees.
And CCR will continue to be bound to and comply with its current and any subsequent collective bargaining agreement with Local 669.”[56]

         36. Mrs. Rodriguez agreed to these terms on the record on CCR’s behalf: “CCR is agreeable to that.”[57] There was no mention of the IRS approval requirement.

         37. During the hearing and in compliance with the terms of the Settlement Agreement, the Union withdrew its ULP charges against CCR.[58]

         38. CCR and the Union also drafted the formal Notice to be posted by CCR. The Notice restated the terms of the Settlement Agreement, was initialed by Mr. Rodriguez on behalf of CCR, and was received into the NLRB record.[59]

         39. The Settlement Agreement was amended later that day to provide that $3300 of the $450, 000 would be paid as back wages to a terminated CCR employee. That part of the agreement was ultimately performed by CCR’s payment of the backpay.[60]

         40. Despite the agreement reached on the record, it is clear and undisputed that certain terms were left unresolved at that time. These included the amount of the down payment and, therefore necessarily, the amount of the monthly installments as it related to the $450, 000 settlement payment.[61] Indeed, the agreement specifically stated that this would be “agreed upon by the parties at a later date.”[62] Other terms not included on the record were the amounts related to the confession of judgment, how long CCR would continue to be bound to and comply with the current and any subsequent collective bargaining agreements, and CCR’s agreement to pay a former employee $3300 in back wages.[63]

         41. There are two main areas of contention at the center of whether the contract is binding and enforceable. First, was IRS approval a condition of the settlement. Second, were any of the unresolved terms of the settlement “material or essential” such that, despite the on the record Settlement Agreement, there was no binding contract formed on February 17, 2016.

         CCR’S ALLEGED IRS CONDITION

         42. According to Mr. and Mrs. Rodriguez, during the February 17, 2016 negotiations, they explained to Moffett and Cacioppo that, given CCR’s sizable debt to the IRS, the settlement was conditioned on the IRS approving the settlement.[64] This is disputed by Moffett who testified that, while she understood CCR owed money to the IRS, the Settlement Agreement was not conditioned on IRS approval.[65]

         43. According to Mrs. Rodriguez, before going back on the record at the NLRB hearing, the Union acknowledged that IRS approval would be part of the terms of settlement. More specifically, Moffett had drafted notes that the parties were using to negotiate the terms of settlement.[66] Mr. Rodriguez testified that, after reviewing these notes, he pointed out to Moffett that the IRS condition was not in the notes, and, in response, Moffett represented to Mr. Rodriguez that the IRS condition would be included in the final, written agreement that would be mailed to CCR.[67] According to Mrs. Rodriguez, based on this representation, CCR believed that the Union had agreed that the settlement was subject to IRS approval[68] and knew that CCR could not formally agree to the settlement without this approval.[69]

         44. The Settlement Agreement terms memorialized in the NLRB record did not include any terms conditioning the settlement on IRS approval. Indeed, there was no reference whatsoever to the IRS. Nor did the Notice or amendment to the Settlement Agreement, both prepared that day, include any terms conditioning the agreement on IRS approval or make reference to the IRS.[70]

         45. Quick Response admits that, in pre-settlement correspondence between CCR and the Union, the parties did discuss an IRS problem, but only as a separate issue from the proposed settlement terms. On February 15, 2016, two days prior to the NLRB hearing and settlement, Mrs. Rodriguez, emailed the Union and asked: “What if the IRS decides that we [CCR] need to close?” The Union replied the following day that if, at some later date, the IRS ordered CCR to close, “the company would be required to negotiate [with the Union] over the closing….”[71]

         46. According to Quick Response, before and during the settlement negotiations of February 17, the Union understood that CCR owed over $1million dollars to the IRS, [72] that CCR was subject to a federal tax lien, [73] that the lien “ha[d] an effect on the Company’s cash on hand, ”[74] that an IRS tax lien takes precedence over all other encumbrances, [75] and that CCR’s very existence was in jeopardy by virtue of its debt to the IRS.[76]

         47. Specifically, during the February 17 negotiations, CCR raised with the Union the issue of CCR’s existing tax debt to the IRS.[77] Moffett admitted that Mr. and Mrs. Rodriguez “mentioned an IRS debt” and that they discussed the fact that “the IRS lien [had] an effect on the Company’s cash on hand.”[78] Likewise, Cacioppo admitted that both Mr. and Mrs. Rodriguez informed him that CCR owed the IRS some money.[79]

         48. Quick Response attempts to explain and justify the failure of Mr. and Mrs. Rodriguez to insist that the IRS approval condition be made a part of the Settlement Agreement read into the record by pointing to the fact that Mr. and Mrs. Rodriguez were not lawyers and that they were assured by Moffett that this condition would be put in the final written agreement.[80]

         49. Mrs. Rodriguez testified that, after the February 17 hearing, she contacted the IRS about the settlement with the Union, specifically to discuss the proposed amounts that the Union would be requiring of CCR as additional monthly payments, which included the yet-to-be determined monthly payments for the $450, 000 settlement payment, as well as the additional $19, 000 to $30, 000 per month estimate that would have been required under the existing CBA and any subsequent CBA.[81] Mrs. Rodriguez learned that the IRS was not going to allow these additional payments.[82]

         50. Mr. Rodriguez testified that he then called the IRS “to see if [he] could work out something because [he] wanted to stay in business.”[83] Mr. Rodriguez spoke with the same IRS agent that CCR had been making payments to as part of the payment plan it had with the IRS.[84] He received the same information as Mrs. Rodriguez.[85] Based on his conversation with the IRS agent, Mr. Rodriguez came away with an understanding that CCR could not incur any additional debt as proposed by the Settlement Agreement until the IRS was paid first.[86] Consequently, he concluded that CCR could not effectuate the settlement with the Union.[87]

         51. Plaintiff points to a July 20, 2016 affidavit given by Mrs. Rodriguez to the NLRB, where she states that the “only conversation I had with the IRS about the settlement with the Union” took place after the February 17 hearing and that she “never submitted anything in writing to the IRS about the settlement.”[88] The IRS never ordered CCR to close or to reject the NLRB Settlement.

         THE UNRESOLVED TERMS OF THE AGREEMENT

         52. Quick Response argues that the purported settlement on the record was not complete, as the parties agreed that additional terms and conditions were to be worked out between the Union and CCR. These additional terms included, among other things, the amount of the down payment and the amount of the monthly installments as it related to the $450, 000 settlement payment.[89] Other terms not included on the record were the amounts related to the confession of judgment, how long CCR would continue to be bound to and comply with the current and any subsequent collective bargaining agreements, and CCR’s agreement to pay a former employee $3300 in back wages.[90] Therefore, the recitation of the Settlement Agreement into the record before the ALJ was not, argues Quick Response, a final, complete and enforceable settlement, as there were additional material terms to be worked out.[91]

         53. Plaintiff counters that Mrs. Rodriguez’s NLRB affidavit refutes Quick Response’s claim that the Settlement Agreement was only preliminary, incomplete, and/or missing material terms. In her sworn affidavit, she described it as “the settlement CCR agreed to at the hearing” and as pending only IRS approval.[92]

         54. Quick Response argues that even Moffett admitted that the record was not complete. She testified that when the ALJ said “that’s it, ” this was inaccurate as they forgot to put on the record that CCR would agree to pay its former employee $3300 in back wages.[93]

         55. Following the February 17 hearing, Moffett forwarded to Mrs. Rodriguez what Moffett described as “a draft settlement that captures the parties’ verbal agreement.”[94] The Court will refer to this as the “Draft Settlement.”[95] Quick Response points out that, in paragraph 1 of the Draft Settlement, Moffitt changed the payment term from eight to nine years, which the parties had “not negotiated.”[96] She explained that she “was making a proposal, including a very low down payment and lower monthly payments, ” in order to “spread it out over a longer period of time in order to make those monthly down payments lower.”[97]

         56. Moffett also testified that CCR had not agreed to this proposed extension of the payment term, nor had CCR agreed to the proposed $25, 000 down payment or the $4400 monthly note as set forth in the Draft Settlement.[98] She reiterated that she “was making an initial proposal as to the down payment and the monthly installments with the hopes of getting [CCR] started on their payments as soon as possible.”[99]

         57. Quick Response maintains that the Draft Settlement differed in other substantive respects from the terms read into the record. For example, it required that all settlement payments be automatically withdrawn from CCR’s bank account, it outlined the amount the Union benefit funds would receive versus the amount the Union would receive from the monthly installments, it included an agreement by CCR to be bound to and comply with the existing CBA and any subsequent CBAs for a specified duration, specifically, the 9-year term of the settlement payments, and it included an agreement by CCR that, even if it were to pay off the settlement obligation early, it would still be bound to the 9-year term of the CBA.[100]

         58. The Draft Settlement also included a statement by the parties that the agreement represented “the full and final Agreement between them.” This, argues Quick Response, indicates that the Draft Settlement was the proposed final expression, as set forth by the Union, of the parties’ intent.[101]

         59. The Draft Settlement also did not include a term concerning IRS approval.[102]

         60. The Draft Settlement was never signed by CCR or the Union.[103]

         CCR’S REPUDIATION OF NLRB SETTLEMENT

         61. Although CCR made the required back wages payment to the wrongfully terminated CCR employee, CCR failed to make any of the other payments required by, or to otherwise comply with the Settlement Agreement.[104]

         62. Counsel for the Union sent a series of e-mails to CCR after the NLRB hearing and Settlement Agreement attempting to get CCR to sign the Draft Agreement. CCR did not respond to these e-mails.[105]

         63. On about March 11, 2016, after Mr. Rodriguez had talked to the IRS, he and Patel made the decision to close CCR.[106] The decision was made to close CCR because of its financial burdens.[107]

         64. On about March 11, 2016, Mrs. Rodriguez announced to CCR’s employees that CCR was closing.[108]

         65. On about March 14, 2016, Mrs. Rodriguez informed Cacioppo that CCR was closing because the IRS allegedly told her that CCR’s first obligation was to the IRS.[109]

         66. According to the Rodriguez’s testimony, CCR closed and ceased providing fire protection services on about March 18, 2016 and has not provided those services since.[110]CCR still exists as a legal entity.[111]

         67. After CCR failed to respond to the Union’s requests to complete the settlement, the Union’s counsel wrote to the NLRB on March 24, 2016 in protest.[112]

         68. On March 25, 2016, Mrs. Rodriguez, on behalf of CCR, responded by e-mail, claiming for the first time that the NLRB Settlement was void because the IRS had not approved it.[113] The email was sent to Moffett and Cacioppo, among others, and reiterated her belief that the settlement agreement was subject to IRS approval and that this had been communicated to them on multiple occasions during settlement negotiations: “The agreement was entered into with good intentions and faith. But what was not written and signed, is the fact that this was all pending what the IRS said we could do about this agreement. This comment was stated many times by Rosael and myself to Tony and Ms. Moffett.”[114]

         69. On July 1, 2016, the Union filed suit against CCR, Quick Response and others.[115]

         ISSUES AND SUMMARY OF PARTIES’ CONTENTIONS

         70. The central issue in the case is whether the February 17, 2016 Settlement Agreement between CCR and Union, put on the record during the NLRB hearing, is a binding contract. Plaintiff contends that it is. Quick Response maintains it isn’t.

         71. As mentioned earlier, both sides agree that there were terms of the contract left unresolved at the time the agreement was put on the record.[116] These included:

a. the amount of the down payment;
b. the amount of monthly installments;
c. how long CCR would continue to be bound by the current and future CBAs;
d. the amount to be paid to a former CCR employee.

         72. Whether the agreement was a binding contract depends first, on whether the settlement was contingent on IRS approval. If it was, as Quick Response contends, then there was no binding contract since the IRS never “approved” the contract.

         73. Second, were any of the matters left unresolved at the time the agreement was put on the record (most prominently, the amounts to be paid by CCR as the down payment and monthly installments), “material or essential terms.” If they were, as Defendant contends, there was no binding contract. If they weren’t material or essential but rather, merely incidental, then the contract could be binding despite the unresolved terms.

         74. If the Settlement Agreement was a binding contract, then CCR is clearly liable. But whether Quick Response would also be liable to the Union depends on whether it is the alter ego or Golden State successor to CCR. Plaintiff argues it is both. Quick Response insists that it is neither.

         FINDINGS OF FACT RE IRS APPROVAL

         75. While Quick Response argues that the Settlement Agreement was conditioned on IRS approval, the great weight of the evidence establishes it was not. While the Union was aware of the large amount owed by CCR to the IRS, approval by the IRS was never a condition of the settlement.

         76. First and foremost, the Court notes that the Settlement Agreement itself says nothing about this alleged condition.[117] And after the terms were read into the record, Mrs. Rodriguez expressly stated that “CCR is agreeable to that.”[118] Neither she nor Mr. Rodriguez said anything to the ALJ suggesting that CCR’s agreement to the terms stated on the record was somehow “conditioned” on any other, unstated term.

         77. The only evidence Quick Response points to in support of its position that the Settlement Agreement was conditioned upon IRS approval is the testimony of Mr. and Mrs. Rodriguez. However, the Court finds the testimony of both these witnesses lacks credibility, especially as it pertains to this critical issue.[119]

         78. The testimony of Mrs. Rodriguez was internally inconsistent. When questioned by Plaintiff’s counsel about the settlement negotiations, Mrs. Rodriguez testified that she was not directly involved in the February 17 negotiations:

Q: During the day when you were at the – this was – was the hearing at the NLRB offices?
A: Yes.
Q: And Natalie Moffett was there?
A: Yes.
Q: And you and she and JR and Mr. Patel by phone discussed settling the NLRB case?
A: No, I never discussed it. I can’t make the decisions for CCR.
Q: I’m not ---A: I heard the conversation but I did not --- I was not involved in the discussion of it.[120]

         79. Yet, when questioned by counsel for Quick Response, Mrs. Rodriguez reversed herself and testified she told Moffett and Cacioppo “at the end of every sentence” that ...


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