Conduct-Based Adoption of Unsigned Collective Bargaining Agreements and Mandatory Audit Compliance
Commentary on Demopoulos v. United Metro Energy Corp., 24-1684-cv (2d Cir. 2025)

1. Introduction

When a purchaser of a unionized business chooses to live with parts of a collective bargaining agreement (“CBA”) but never signs it, is the company still bound to the whole agreement—including its onerous audit clause? The United States Court of Appeals for the Second Circuit supplied a clear answer in Demopoulos v. United Metro Energy Corp. The Funds for Teamsters Local 553 sued United Metro Energy (“United”) after United refused to open its books for a 2018 audit covering pension and welfare contributions. The district court granted summary judgment and issued a mandatory injunction compelling the audit. On appeal, United argued that (1) it never intended to adopt two Master CBAs it never signed, and (2) the audit was overbroad. The Second Circuit disagreed, holding that United’s conduct unequivocally demonstrated an intent to adopt the unsigned CBAs and, therefore, the incorporated trust-fund audit provisions applied in full. The judgment was affirmed in all respects.

2. Summary of the Judgment

• Type of decision: Summary Order (non-precedential under 2d Cir. R. 32.1.1 but still persuasive).
• Holding: United Metro Energy adopted the 2010-2013 and 2013-2016 Master Contracts by conduct; consequently, it must comply with audit obligations for 2013-2018. District-court injunction compelling the audit is affirmed.
• Main rationale: The undisputed facts (payment of contributions, submission of remittance reports, acceptance of audits, and payment of contract wages/benefits) satisfy the multifactor test in Brown v. C. Volante Corp. for conduct-based adoption of a CBA.
• Procedural posture: Appeal from EDNY (Block, J.) summary judgment in favor of the Funds; review de novo.
• Outcome: Order of the district court AFFIRMED.

3. Analysis

3.1 Precedents Cited and Their Influence

• Brown v. C. Volante Corp., 194 F.3d 351 (2d Cir. 1999)
  Principal case establishing the Second Circuit’s “intent-to-be-bound” factors: contributions, remittance forms, audits, dues, and wages/benefits. The panel applies these factors almost mechanically, finding that each favors the Funds.
• Baskin v. Hawley, 807 F.2d 1120 (2d Cir. 1986)
  Early articulation that employer conduct can substitute for a signature. Reinforces the Volante factors.
• Moglia v. Geoghegan, 403 F.2d 110 (2d Cir. 1968)
  Distinguishing precedent. There, the employer never honored CBA terms; here, United did, undercutting its disclaimer.
• Garcia v. Heath, 74 F.4th 44 (2d Cir. 2023)
  Restates the standard of review for summary judgment (de novo) and the obligation to draw inferences for the non-movant.
• Parada v. Banco Industrial de Venezuela, 753 F.3d 62 (2d Cir. 2014)
  Cited for the rule that arguments first raised on appeal are forfeited—used to reject United’s new “audit-scope” argument.

3.2 Legal Reasoning

The Court’s reasoning unfolds in two steps.

1. Intent to Be Bound.
   Applying Volante, the Court catalogues United’s conduct:
   • Paid pension and welfare contributions for three retail-driver employees from 2013–15.
   • Filed remittance reports reflecting those contributions.
   • Allowed auditors full access for 2013, 2014, 2015, and 2017.
   • Paid retail-delivery employees the exact wages and benefits in the Master Contracts.
   United’s argument—that only “some” employees received Master-Contract treatment—fails because the Master Contract applies only to retail-delivery work, and United identified no retail employees excluded from the bargain. Selectivity, therefore, was consistent with the contract’s own scope, not inconsistent with adoption.
2. Entitlement to Audit.
   Once adoption is established, the trust agreements—incorporated by reference—grant the Funds an unqualified right to audit. United’s belated claim that the audit “exceeds the scope” is forfeited under Parada. The mandatory injunction compelling an audit from March 1, 2013 to December 31, 2018 therefore stands.

3.3 Potential Impact

• Corporate acquisitions: Buyers of unionized companies cannot cherry-pick favorable CBA provisions without risking binding adoption of the entire agreement. Due diligence on legacy CBAs becomes paramount.
• Trust-fund enforcement: Multiemployer benefit funds may rely on employer conduct—contributions, remittances, prior audits—as powerful evidence to compel future compliance and audits.
• Litigation strategy: Employers must raise audit-scope objections in the district court, or they will be forfeited on appeal in the Second Circuit.
• Persuasive value: Although a summary order lacks formal precedential effect, district courts within the Circuit regularly find such orders highly persuasive, especially where they apply settled doctrine like Volante.

4. Complex Concepts Simplified

• Summary Order: A short, non-precedential decision used when the panel believes the existing law is clear.
• Collective Bargaining Agreement (CBA): A contract between a labor union and an employer governing wages, hours, and other employment terms.
• Adoption by Conduct: A legal doctrine allowing courts to treat an employer as bound by a CBA it never signed if its behavior objectively manifests assent.
• Multiemployer Benefit Fund: Pension or welfare fund jointly administered by union and employer trustees, funded by contributions from multiple employers.
• Audit Clause: CBA or trust-agreement provision empowering fund trustees to inspect employer records to verify contribution accuracy.
• Summary Judgment: A procedural device allowing a court to resolve a case without trial when no genuine factual dispute exists.
• Forfeiture on Appeal: Failure to raise an argument in the trial court generally bars its consideration on appeal.

5. Conclusion

Demopoulos v. United Metro Energy Corp. re-affirms a straightforward but often-litigated rule: actions speak louder than signatures. An employer that pays CBA wages, makes fund contributions, files remittance reports, and submits to audits will be treated as having adopted the entire agreement—complete with its audit obligations. Attempts to later disclaim the contract, limit its scope, or object to audits will face an uphill battle, especially if new arguments are reserved for appeal. For practitioners, the decision underscores (1) the evidentiary weight of routine fund interactions, and (2) the necessity of preserving arguments at every stage. For the law of ERISA-governed multiemployer plans, the judgment fortifies trustees’ audit powers and provides persuasive authority that conduct-based adoption survives even deliberate employer attempts to “get away from the Master Contract.”