Auditor's Report That Simply Quantified Amounts Owed Under Certain Assumptions Was Admissable
TRUSTEES OF THE CHICAGO PLASTERING INSTITUTE PENSION TRUST v. CORK PLASTERING COMPANY (July 1, 2009)
G&J Plastering Company is a plastering contractor in the Greater Chicago area. Between 1993 and 2002, three different labor unions represented the plastering employees of G&J, including Local 5 of the Journeymen Plasterers' Protective and Benevolent Society of Chicago. The collective bargaining agreements of each union required G&J to make contributions to various union trust funds. Local 5 required the company to contribute based on an employee’s union, regardless of where the work was performed. One of the other unions required the company to make contributions based on work location, not the employee’s union. A union election conducted in 2002 resulted in the termination of Local 5’s representation of the company. In an exit audit, the company disclosed that it had been making contributions based on union membership rather than work location and had no records showing where work was performed. Given this absence of data, Local 5 instructed its auditors to compute the amount owed based on a set of assumptions and a review of the company’s payroll records. The auditors concluded that the company owed in excess of $800,000. Local 5 filed suit. After a three-day bench trial, the court awarded $1.1 million for unpaid contributions plus interest but disallowed the union's request to recover $45,000 in audit costs. Both sides appeal.
In their opinion, Judges Bauer, Rovner and Evans affirmed. The Court considered three issues on appeal: a) the admissibility of the audit report, b) the admissibility of testimony about the report by one of the auditors, and c) the court's refusal to award audit costs. The Court first upheld the admissibility of the audit report. The report itself was not hearsay -- it was merely a summary of the company's payroll data. The assumptions the auditors applied to the data were not secret, were required because of the company's failure to keep records, and were considered by the lower court and accepted in part and rejected in part. The Court also found that the testimony in support of the report proper. The witness, although he was not a field auditor, was in regular contact with them, reviewed their work, and reviewed the final report. His testimony was not an audit opinion and he did not have to be qualified as an expert. Finally, with respect to the audit costs, the Court concluded that the lower court was within its discretion to deny the request when the union failed to provide sufficient supporting documentation (hours spent, individuals performing the work, qualifications of individuals, hourly rates, etc.).
