United States District Court for the District of Columbia
May 7, 2004.
JOHN FLYNN, et al., Plaintiffs,
OHIO BUILDING RESTORATION, INC., et al., Defendants
The opinion of the court was delivered by: REGGIE B. WALTON, District Judge
AMENDED MEMORANDUM OPINION
This matter is before the Court on Plaintiffs' Motion for Summary
Judgment ("Pls.' Mot."). Plaintiffs are the fiduciaries of the
Bricklayers and Trowel Trades International Pension Fund ("IPF" or the
"Fund"), and have brought this action to enforce the terms of a
collective bargaining agreement entered into with defendant Ohio Building
Restoration Inc. ("OBR"). Compl.*fn1 ¶¶ 1, 8, 11. Plaintiffs allege
that Exact Construction Services Inc. ("Exact") is the alter ego of OBR,
and that Exact has failed to make contributions to the Fund as required
by section 515 of the Employee Retirement Income Security Act ("ERISA"),
§ 29 U.S.C. § 1145. Comp. ¶¶ 1, 9-10. After careful
consideration of the record and the applicable legal authority, and for
the reasons set forth below, the Court concludes that summary judgment
must be entered for the plaintiffs.
I. Factual Background
The IPF "is an `employee benefit plan' within the meaning of [the
ERISA,] Section 3(3) of 29 U.S.C. § 1002(3), and is a `multi-employer plan' within the meaning of Section 3(37) of the
ERISA, 29 U.S.C. § 1002(37)." Compl. ¶ 3. The Fund "is administered in the
District of Columbia." Id. ¶ 2. Defendant OBR is a company that
"maintain[s] offices and conduct[s] business in the state[s] of Ohio,"
Michigan, and Indiana and "employs or ha[s] employed members of the
International Union of Bricklayers and Allied Craftworkers and its
affiliated local unions ("unions")." Id. ¶¶ 5, 7; Defs. Opp'n at 10.*fn2
Defendant Exact, based upon plaintiffs' information and belief, is "an alter
ego of OBR, [because, among other things, the two entities allegedly have]
interlocking directors, common control, [perform] common type[s] of work
and [employ] the same or similar employees." Id. ¶ 9.
Plaintiffs brought this action on behalf of the IPF in their role as
trustees. Id. ¶¶ 1, 3. Pursuant to the "Collection
Procedures of the Central Collection Unit of the Bricklayers and Allied
Craftworkers ("CCU"), the IPF is authorized to effect [employer]
collections on behalf of the International Masonry Institute ("IMI") and
the Bricklayers and Allied Craftworkers International Union ("BAC") [and
is] authorized to file suit on behalf of the BAC Local 1 Michigan Joint
Delinquency Committee. . . ." Id. ¶ 4. Plaintiffs allege
that the defendants have failed to make contributions to the Fund as
required by the Collective Bargaining Agreement ("CBA") that defendant
OBR executed with the unions. Id. ¶¶ 8, 11. Specifically,
plaintiffs allege that defendant Exact, as OBR's alter ego, "was
obligated to make certain payments to the IFF, IMI, BAC and Local Funds
on behalf of employees covered by the Agreement" and has failed to do so.
Id. ¶¶ 9-10. Based on the allegation that Exact is the alter
ego of defendant OBR, plaintiffs seek an order declaring that both OBR and Exact "are
jointly and severally liable for all amounts owed to the IPF, IMI, BAC
and Local Funds." Id. ¶ 1, at 5.
A. Plaintiff's Arguments in Support of Summary Judgment
Plaintiffs have filed a motion for summary judgment pursuant to Federal
Rule of Civil Procedure 56, in which they argue that they are entitled to
judgment in their favor as a matter of law on the grounds that there is
no genuine issue of material fact remaining to be resolved in this
matter. Fed.R.Civ.P. 56. Plaintiffs assert that in reviewing this
matter the Court need only focus on whether OBR and Exact "share [common]
ownership, management, business purpose, operation, equipment,
supervision, and work force." Pls.' Mem.*fn3 at 7-8 (citing Greater
Kansas City Laborers Pension Fund v. Thummel, 738 F.2d 926, 929 (8th
Cir. 1984)). Plaintiffs argue that the evidence in the record related to
all of these factors supports a finding that Exact is the alter ego of
OBR. As an example offered in support of its position, plaintiffs note
that, according to the defendants' answers to interrogatories, "Ohio
Building . . . was owned by Duane Haas while Exact was owned by Duane
Haas' wife, Debra, and the Vice President of Ohio Building, John Hall."
Id at 9; Exhibit ("Ex.") H (Defendants' Objections and Answers to
Plaintiffs' First Interrogatories and Requests for the Production of
Documents) ("Defs.'Ans.") No. 9. Moreover, plaintiff points out that by
her own admission, Ms. Haas acknowledges that she was designated by her
husband to be a fifty percent owner of Exact "to be . . . his person"
at Exact. Id. at 19; Pls.' Mot., Ex. E (deposition of Debra
Haas, dated May 12, 2003) ("Debra Haas Dep.") at 19-20. According to
plaintiffs, it is undisputed that John Hall had the "authority to hire
and fire employees at both Ohio Building and Exact." Id. at 10;
Ex. H, Ans. No. 9. Plaintiffs further note that both companies have
performed restoration contractor services in the same geographic regions
at the same times. Pls.' Reply*fn4 at 4-5; but see Defs.'
Opp'n*fn5 at 11. OBR leases adjoining properties located in Toledo,
Ohio, at 830 Mill Street and 726 Stanton Street, from an entity known as
the Debra Haas Trust, and in turn subleases the 726 Stanton Street
property to Exact. Pls.' Mem. at 14. Similarly, OBR leases its Detroit
office from the same trust and leases storage space to Exact at that
location. Id. Furthermore, OBR and Exact utilized the same
controller, accountant, attorney, insurance company, and bank, Pls.' Mem.
at 12, 15; Pls.' Mot., Ex. C (deposition of David E. Shultz, dated April
12, 2003) ("Shultz Dep.") at 50, 71, 72, 73; Pls.' Mot., Ex. B
(deposition testimony of John Hall, dated April 9, 2003) ("Hall Dep.") at
89-90, the corporate business records for both corporations were
maintained at the same location, Pls.' Mem. at 15; see also
Defs.' Opp'n at 14-15, and many employees have performed work for both
OBR and Exact during the same year and several painters have done so
within the same pay period, Pls.' Mem. at 11; Pls.' Mot., Ex. C (Shultz
Dep.) at 53-55. Moreover, plaintiffs state that "[m]ost damning to
Defendants' efforts to avoid liability are the Defendants' own admissions
that Exact was formed for the specific purpose of creating an
anti-union business and that Duane Haas could not be as involved in
the business because his company, Ohio Building, was bound by the
collective bargaining agreement." Pls.' Mem. at 18; Pls.' Mot., Ex. D
(deposition of Duane Haas, dated May 12, 2003) ("Duane Haas Dep.") at
45-46 (emphasis in original). B. Arguments Opposing Summary Judgment
Not surprisingly, defendants characterize their relationship in a much
different light than their adversaries. First, defendants assert that the
relevant factors to be considered in making an alter ego determination in
this Circuit are whether the corporations in question enjoy "interrelated
operations, common management, centralized control over labor relations,
and common ownership." Defs.' Opp'n at 6 (citing Sheet Metal Workers
Union 102 v. Gibson Brothers. No. Civ. A. 82-0329, 1982 WL 2079, at
*3 (D.D.C. Oct. 27, 1982). Defendants assert that although they maintain
a close working relationship due to their principle officers' long
standing friendships, their respective corporations do not have
interrelated operations. Defs.' Opp'n at 9. Defendants emphasize that OBR
has and continues to focus its resources on masonry projects, while Exact
was formed with the purpose of competing for jobs installing traffic
bearing membranes, and other commercial flooring and waterproofing
systems, id. at 10; Defs' Opp'n, Ex. 1 (Duane Haas Dep.) at 48;
Defs' Opp'n, Ex. 3 (Hall Dep.) at 107-108, and have maintained
arms-length distance on each of the transactions into which their two
corporations have entered. Def.'s Opp'n at 9. Defendants contend that
"OBR works primarily in northeast Ohio, southeast Michigan, and northeast
Indiana, while Exact does almost all of its work in Columbus, Ohio."
Defs.' Opp'n at 10; but see id at 11 (chart showing that the
two organizations have performed work in the same regions during the same
times). Defendants emphasize that contrary to plaintiffs' assertions,
"Exact's lease of a small space in OBR's [main office] does not
constitute `maintaining common offices.'" Id. at 14. Defendants
state that although the two corporations have established a substantial
amount of goodwill between themselves, they have always maintained the proper economic distance between each other and held
steadfast to the requisite formalities for maintaining separate corporate
entities. Id. at 16-17. Defendants concede that John Hall is a
common figure to the management of both corporations, but maintain that
all other members of their respective management teams have never been in
a position to exercise control over the labor and resources of both
corporations at the same time. Id. at 18.
Defendants further argue that even if this Court were to find that they
did in fact constitute a "single employer or alter ego," the Court would
still need to decide whether or not Exact's employees are a part of the
appropriate bargaining unit for the purpose of applying the CBA.
Id. at 34-35. Stated differently, defendants assert that the
Court must determine whether their respective labor forces have a common
"community of interests" which could be fairly represented by the
plaintiffs, id., which defendants contend is not the case.
A. Standard of Review
As previously indicated, this matter is currently before the Court on
plaintiffs' motion for summary judgment. Federal Rule of Civil Procedure
56 provides that summary judgment "shall be rendered forthwith if 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 any material fact and that the moving party is entitled to a
judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of
material fact exists if "a reasonable jury could return a verdict for the
nonmoving party." Anderson v. Liberty Lobby. Inc.,
477 U.S. 242, 248 (1986). The entry of summary judgment is appropriate after
there has been an "adequate time for discovery . . . [and the] party
[against whom the motion has been filed] 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).
"Credibility determinations, the weighing of the evidence, and the
drawing of legitimate inferences from the facts are jury functions, not
those of a judge. . . ." Id. at 255. When reviewing the
evidence, the Court must draw "all inferences . . . in favor of the
nonmoving party[.]" Coward v. ADT Security Systems, Inc.,
194 F.3d 155, 158 (D.C. Cir. 1999); Aka v. Washington Hosp. Center,
156 F.3d 1284, 1295 (D.C. Cir. 1998).
B. Alter Ego Analysis
(1.) Applicable Standard in Determining Defendants' Alter Ego
The plaintiffs' claim arises under § 515 of the
ERISA*fn6. 29 U.S.C. § 1145. This provision imposes a federal
obligation on employers to contribute to a multiemployer pension fund if
an employer is required to do so pursuant to the terms of a collective
bargaining agreement or multiemployer plan. The provision states:
Every employer who is obligated to make
contributions to a multiemployer plan under the
terms of the plan or under the terms of a
collectively bargained agreement shall, to the
extent not inconsistent with the law, make such
contributions in accordance with the terms and
conditions of such plans or such agreement.
§ 29 U.S.C. § 1145. The alter ego doctrine, upon which
plaintiffs' argument rests, "is meant to prevent employers from evading
their obligations under labor laws and collective bargaining agreements
through the device of making `a mere technical change in the structure or
identity of the employing entity . . . without any substantial change in
its ownership or management.'" Massachusetts Carpenters Central
Collection Agency v. Belmont Concrete. 139 F.3d 304
, 307 (1st Cir. 1998) (quoting NLRB v. Hospital San Rafael,
Inc., 42 F.3d 45
, 51 (1st Cir. 1994) (quoting Howard Johnson
Co. v. Hotel Employees, 417 U.S. 249
, 259-61 n.5 (1974))). While
"the alter ego doctrine is primarily applied to situations involving
successor companies, `where the successor is merely a disguised
continuance of the old employer, . . . it also applies to situations
where the companies are parallel" operations. Belmont, 139 F.3d
at 307 (citations omitted).
The District of Columbia Circuit recently addressed the alter ego
doctrine in a context similar to the one currently before the Court.
See Flynn v. R.C. Tile, 353 F.3d 953 (D.C. Cir. 2004).
R.C. Tile involved a series of family owned, unincorporated,
tile installation businesses. 353 F.3d at 956. Majestic Tile was started
by Joseph Flores in 1970. Id. Joseph's brother Richard worked
with him setting tile in that business until 1995, when the business was
closed due to problems with the Internal Revenue Service. Id.
In 1995, Richard Flores started R.C. Construction. Id. The
unincorporated business was technically in Richard's name, however, his
brother Joseph continued to manage the operations of the new business,
while Richard continued his role of setting tile. Id. Joseph's
wife Priscilla worked at R.C. Construction, managing its office and
finance operations. Id. In 1996, R.C. Construction entered into
a collective bargaining agreement with the local affiliate of a national
union that contained a provision requiring it to contribute to the
pension plans of its covered employees. Id. R.C. Construction
ceased doing business in 1997, and failed to give the pension fund notice
of its intention to withdraw from the CBA. Id. Thereafter, R.C.
Tile was created as an unincorporated entity by a third Flores brother,
Jesse, who joined Richard in the field setting tile while Joseph and his
wife managed the operations of the business. Id. The
plaintiffs, fiduciaries of the employee pension fund, sued shortly thereafter, alleging that R.C. Tile was the
alter ego and successor of R.C. Construction with whom the plaintiffs had
executed the collective bargaining agreement that required R.C.
Construction to contribute to the pension plan of its employees.
Id. at 957. In determining that R.C. Tile was the alter ego of
R.C. Construction, the Court considered the following factors:
"ownership, management, business purpose, operations, equipment, and
customers." Id. at 958. In addition, the Court noted it would
"also look at any transactions and other dealings between the two
entities." Id. However, the Court observed "[n]o single factor
is controlling, and all need not be present to support a finding of alter
ego status." Id. (quoting Belmont, 139 F.3d at 308).
In analyzing these factors, the Court concluded that R.C. Tile was
undoubtably R.C. Construction's alter ego and as such was required to
adhere to the provisions contained in the collective bargaining agreement
as if it had been a signatory to the agreement. Id. at 959-960.
In reaching this conclusion, the Court found that the entities were both
in the business of laying tile in the public works sector of the
construction industry; they both operated in the southern Californian
region; they were successively owned by members of the Flores family; the
assets of the companies were essentially the same and were not
transferred between each other in arms-length transactions; R.C. Tile had
assumed work that R.C. construction had not completed; R.C. Tile had
hired several of R.C. Construction's former employees; and, the business
and financial operations of each entity were controlled by the individual
who owned the initial business and his wife. Id. at 959. While
the Court in R.C. Tile found these factors to be relevant in
analyzing the situation before it, the Court cautioned that "different
considerations may be relevant where a corporation is involved."
Id. at 958 n.3 (citing Greater Kansas City Laborers
Pension Fund v. Superior General Contractors. Inc., 104 F.3d 1050,
1055 (8th Cir. 1997).
In Superior General, the Eighth Circuit had before it a
situation similar to this case and held that an incorporated entity was
not the alter ego of its corporate co-defendant. Superior
General. 104 F.3d at 1058. In Superior General, the
plaintiffs, fiduciaries of several employee trust funds, sued the
defendants, Bohnert Construction Company, Inc. ("New Bohnert") and
Superior General Contractors, Inc. ("Superior General"), for unpaid
contributions pursuant to § 502(g)(2) and 515 of the ERISA.
Id. at 1053. Superior General had been formed in 1988 by
several employees who had worked for the predecessor company of Bohnert
("Old Bohnert") and its owner, Al Bohnert. Id. Al Bohnert, the
founder of the predecessor company (Old Bohnert), helped his former
employees start Superior General, and was its majority stockholder.
However, one of Al Bohnert's former employees "made all decisions
concerning [Superior General's] daily operations, and directed [its]
labor relations." Id. at 1052-53. In 1989, Superior General
signed a "contract stipulation" that obligated itself to be governed by a
collective bargaining agreement, which required employers to make
contributions to employee benefit plans on behalf of employees covered by
the agreement. Id. at 1053. However, in 1992 Superior General
ceased doing business, and ceased making contributions to the employee
benefit plans. Id. Prior to Superior General's demise, Al
Bohnert incorporated Bohnert, and his unincorporated predecessor company
(Old Bohnert) transferred all of its general contracting business to the
new incorporated entity. Id. While the predecessor company (Old
Bohnert) continued in existence the scope of its operations was greatly
diminished. Id. Plaintiffs filled suit shortly thereafter
alleging that Bohnert was the alter ego of Superior General, and as such,
was bound by two collective bargaining agreements to which Superior
General was a signatory employer, and was therefore obligated to make the employee benefit plan contributions Superior
General was obligated to make. Id. The Eighth Circuit affirmed
the District Court's conclusion that Bohnert was not the alter ego of
Superior General. Id. at 1058. However, in reaching this
conclusion, the Eighth Circuit utilized a different formulation of the
alter ego test than the test employed by the District Court.*fn7
Id. at 1055. While the District Court looked to the lack of
commonality between the two corporations' (1) ownership, (2) management,
(3) supervision, (4) business purpose, (5) operations, (6) customers, and
(7) equipment, and (8) the extent to which the closing of Superior
General was motivated by anti-union animus*fn8, the Eighth Circuit
applied more restrictive traditional corporate law principles in making
its alter ego assessment. Id. (citing. In re B.J. McAdams,
Inc., 66 F.3d 931, 937 (8th Cir. 1995)). The Eighth Circuit noted
that the alter ego doctrine as developed in the corporate law context
provides that the legal fiction of a separate corporate entity may be
rejected in the case of a corporation that
(1) is controlled by another to the extent that it
ha[s] independent existence in form only and (2)
"is used as a subterfuge to defeat public
convenience, to justify wrong, or to perpetrate a
fraud. Thus, control by one company over its
alleged alter ego is necessary under the corporate
Superior General. 104 F.3d at 1055 (citations omitted).
The Superior General Court's reasoning for applying the
corporate law test was that: Although the underlying congressional policy
behind ERISA favors the disregard of the corporate
entity in situations where employees are denied
their pension benefits, such policy interests are
not implicated in the present case, which does not
involve an individual pensioner's claim for
benefits; rather, it involves a pension fund's
attempt to collect unpaid contributions. . . .
Moreover even if such interests were at stake in
the present case, we believe the corporate law
standard for determining alter ego status strikes
the appropriate balance between the congressional
intent of ERISA and the long established principle
that a corporation's existence is presumed to be
separate and may be disregarded only under
narrowly prescribed circumstances.
Id. at 1055 (citations omitted).
In Massachusetts Carpenters Central Collection Agency v. Belmont
Concrete Corp., 139 F.3d 304 (1st Cir. 1989), which the Court in
R.C. Tile cited in comparison to Superior General,
the First Circuit had occasion to address issues similar to those
presented in this Court case. The plaintiff in Belmont was the
fiduciary responsible for the collection of union employee benefit funds
and the defendants were both incorporated concrete construction
contractors (Belmont Concrete and Algar Construction). Id. at
305. Algar was established in 1990 by the Bota, Guerreiro, and Dias
families. Id. at 306. Two years later, in 1992, members of
these same families started Belmont. Id. While the companies
were technically owned by various female family members, the District
Court concluded that the control of both corporations rested squarely in
the hands of, and was exercised by, the patriarchs of the three families.
Id. In 1993 Belmont entered into an agreement with a union,
which compelled Belmont's adherence to the terms and conditions of
various local unions' collective bargaining agreements. This in turn
obligated Belmont to make contributions to union employee benefit funds
on behalf of its covered employees. Id. at 307. Less than a
year later, Belmont ceased doing business and the plaintiff filed suit
shortly thereafter, alleging that Algar was obligated to make the
employee benefit fund contributions on behalf of Belmont's employees as
the alter ego of Belmont. Id. at 305. The District Court agreed with the plaintiff. Id at 305, 307.
In upholding the District Court's decision, the First Circuit concluded
that Algar was indeed the alter ego of Belmont, relying on the following
factors: the companies were commonly owned by the three families; Messrs.
Bota, Guerreiro, and Dias all exercised control over the day-to-day
operations of the companies and supervised the companies field operations
interchangeably; the companies had identical business purposes which were
performed in the same state; they utilized many of the same employees;
they had their offices at the same location; provided services for many
of the same customers; and, the companies shared equipment. Id.
at 309. Finally, although the District Court had suggested the existence
of anti-union animus, the First Circuit declined to address this
question, concluding that the evidence as a whole was "sufficient to
support the conclusion that a reasonable finder of fact would have
concluded that Algar [was] Belmont's alter ego" and therefore "[a]
finding of anti-union animus [was unnecessary]." Id
The District of Columbia Circuit has not yet addressed which test or
standard for assessing alter ego liability in the corporation context is
applicable in this Circuit. As noted above, the Circuit Court recently
opined that "[d]ifferent considerations may be relevant where a
corporation is involved," citing Superior General and
Belmont as cases that have taken the two different positions.
R.C. Tile. 353 F.3d at 958 n.3 (emphasis added). This Court
must therefore make that determination.
As mentioned above, the defendants have suggested that this Court
should apply the test used in Sheet Metal Workers Union 102 v.
Gibson Brothers. No. Civ. A. 82-0329, 1982 WL 2079, at *3 (D.D.C.
Oct. 27, 1982). In Gibson Brothers, a former member of this Court
considered whether the corporations in question enjoyed (1) interrelated
operations, (2) common management, (3) centralized control over labor operations, and (4)
common ownership in determining whether the non-signatory corporation
could be held liable under the ERISA for the contractual obligations of
the related signatory corporation. Id. (noting that these
"criteria were originally invoked for collective bargaining unit
determinations, not joint employer status for the purpose of determining
. . . whether one employer is the same or `alter ego' of the other").
Concluding that the plaintiffs had failed to demonstrate for summary
judgment purposes that the signatory corporation was "either a joint
employer of [the non-signatory corporation's] employees, or . . . [was]
an alter ego corporation[,]" id. at 7, the Gibson
Brothers Court stated that "[p]erhaps the most important . . .
criteria for a finding of joint employer [or alter ego corporation]
liability is the degree of control exercised by the nominally independent
corporation over the labor relations policies affecting the employees
expressly subject to the collective bargaining agreement." Id.
at 5. However, the Court went on to hold that it would have to also "find
that that failure to disregard the separate existence of the
non-signatory corporation would result in substantial fraud or
injustice" to hold that such liability existed. Id. at 6.
Thus, the Gibson Brothers Court seemingly adopted the Eighth
Circuit's more restrictive corporate law test, as it applied what
essentially became the second prong of that test as articulated in
Superior General. 104 F.3d at 1055 ("The legal fiction of the
separate corporate entity may be rejected in the case of a corporation
that . . . (2) is used as a subterfuge to defect public convenience, to
justify wrong, or to perpetrate a fraud.). But Gibson Brothers
was decided without the guidance now provided by the Circuit Court in
R.C. Tile, which adopted the factors deemed relevant to the
alter ago assessment applied by the First Circuit in Belmont. R.C.
Tile, 353 F.3d at 959. And, the Belmont Court specifically
rejected the argument "that wrongful motive is a sine qua non for finding alter ego status in an ERISA case." Belmont, 139
F.3d at 308. While the Court in R.C. Tile did not have to
decide whether wrongful motive is essential to an alter ego finding, this
Court is confident that if and when it will have to do so, the District
of Columbia Circuit will side with the First Circuit. This sense of
confidence is derived from the Court's rejection in R.C. Tile
of the argument that alter ego status cannot be established in the
absence of "anti-union animus," R.C. Tile. 353 F.3d at 960,
which the Court finds analogous to a claim that alter ego status cannot
be demonstrated because wrongful motive is lacking.*fn9 Accordingly, the
Court rejects defendants' position that they cannot have alter ego status
because plaintiffs have not established that Exact was created to evade
the obligations of the CBA.
Further reason for concluding the R.C. Tile Belmont
approach is the correct standard for this Court to apply in this case is
found in the text of the R.C. Tile opinion where the Court
discusses the rationale for imposing the alter ego liability in the ERISA
context. This result is called for despite the R.C. Tile
Court's statement that "[d]ifferent considerations may be
relevant where a corporation is involved." Id. at 958 n.3. In
this same footnote, the Circuit Court commented that in Belmont
the First Circuit applied the same "criteria" it deemed relevant in
making the alter ego determination in the non-corporate setting, as it
also did in the corporate context. Id. Significant to the
Court's conclusion that different considerations should not be employed
here because corporations are involved, at least not based on the record
in this case, is the fact that this case, like R.C. Tile,
concerns a "`multi-employer plan' within the meaning of . . . ERISA . . ." Compl. ¶ 3; Plaintiffs' Rule 7.1(H) Statement of
Material Facts as to Which There is No Genuine Issue ("Pls' Facts") ¶
1; Defendants' Rule 7.1(H) Statement of Issues to Which There is a
Genuine Issue to be Litigated, Ex. 10. As explained in R.C. Tile.
"Section 515 [of the Multi-employer Pension Plan
Amendment Act of 1980, 29 U.S.C. § 1145] was a
response to the problem created when an employer
defaults upon its obligation to fund a
multi-employer defined-benefit pension plan: If
one employer does not make its contributions to
such plan, then the other participating employers
must make larger contributions to cover the
R.C. Tile. 353 F.3d at 958 (citation omitted). Moreover,
"[t]he funding burden may be shifted beyond other participating employers
to taxpayers via the Pension Benefit Guaranty Corporation, and
to beneficiaries in the form of reduced pension benefits." Id.
(citation omitted). These potential consequences underlie the enactment
of § 515, which "evinces a strong congressional desire to minimize
contribution losses and the resulting burden such losses impose upon
other plan participants." Id. (citation omitted). The statute
places multi-employer plans in a better position than they were before
its adoption because "it facilitates recovery of contributions from
delinquent employers and by limiting the defenses available to an
employer in an action brought to enforce the obligation created by §
515." Application of "[a]lter ego liability under § 515 further
protects the federal interest in the solvency of the multi-employer
pension plans by enabling ERISA trustees to recover delinquent
contributions from a sham entity used to circumvent the participating
employer's pension obligations." Id. (citing Belmont, 139 F.3d
at 305 n.3). Here, some of the employee benefit contributions OBR was obligated to
make were pension funds. Pls' Facts ¶ 2. And the policy reasons for
§ 515's enactment apply equally regardless of whether an employer is
incorporated or not. The Court can therefore discern no reason why the
test for determining alter ego status should be any different.
Accordingly, the Court will apply the R.C. Tile factors in this
(2.) Whether Exact is OBR's Alter Ego
As noted above, in determining whether Exact is the alter ego of OBR,
the Court must consider "the similarities between the two enterprises in
their ownership, management, business purpose, operations, equipment, and
customers." R.C. Tile. 353 F.3d at 958. In addition, the Court
can consider "any transactions or other dealings between the entities."
Id. "`No single factor is controlling and all need not be
present to support a finding of alter ego status[.]'" Id.
(quoting Belmont at 308).
Defendants' primary argument in opposition to plaintiffs' similarities
in ownership position is that none of the owners of Exact have any
ownership interest in OBR. Defs.' Opp'n at 22-25. While this may be true
in a technical sense, it does not accurately reflect the reality of the
situation. It is undisputed that all of Exact's stocks are equally owned
by OBR's vice president, John Hall, and the wife of OBR's owner and
president, Debra Haas. Pls.' Mem., Ex. H (Defs.' Ans.) No. 9. There is
also no dispute about the fact that the money Ms. Haas used to invest in
Exact came from her and her husband's joint checking account. Pls.'
Facts, Ex. D (Duane Haas Dep.) at 45. While defendants contend that Mr.
Haas did not have any interest in or control over Exact, Ms. Haas herself
has admitted that she was designated by her husband to represent him in
the business. Pls.' Mot., Ex. E (Debra Haas Dep.) at 19-20. The Court
cannot ignore this telling statement, despite the contrary spin defendants' advance in their
opposition. Defs.' Opp'n at 18 (asserting that "Mr. Haas has full
ownership of OBR, but no ownership interest or financial control over
Exact."). This statement, coupled with the fact that marital funds of the
Haas' were used to purchase Exact, conclusively establishes that Duane
Haas has an ownership interest in Exact, regardless of how defendants try
to characterize the situation. See Vance v. NLRB,
71 F.3d 486, 492 (4th Cir. 1995) (common ownership determination of two
entities by the NLRB as part of single employer finding upheld because
"initial funding of one entity from a joint husband wife account and the
continuing involvement of one spouse in both enterprises sufficiently
demonstrated the presence of common ownership.) (citing H.A. Green
Decorating Co., 29 N.L.R.B. 157, 163 (1990), enforced, 983 F.2d 1073
(7th Cir. 1992): see also Adams v.
Chambers, 612 N.E.2d 746 (Ohio Ct. App. 1992) (property acquired by
use of funds from spouses'joint account during marriage is marital, not
separate property) (citation omitted).*fn10 Accordingly, common
ownership of both OBR and Exact lies with Duane Haas.*fn11
Similarities in the management of OBR and Exact further supports
plaintiffs' position. As accurately noted by plaintiffs, "[n]ot only was
there significant overlap in the directors, officers and managers of the
two companies, but the individuals filling these roles exercised similar
authority and performed similar roles at each company." Pls.' Mem. at 10.
Defendants admit that John Hall is the Vice President of OBR and the President of
Exact, Defs.' Opp'n at 18, and therefore has management responsibilities
for both entities. Pls.' Facts, Ex. B at 9-12. Debra Haas is the
secretary for both corporations. Id. Hall and Mrs. Haas both
had authority to sign documents on behalf of each company. Pls.' Facts,
Ex. B (Hall Dep.) at 94-95; Ex. E (Debra Haas Dep.) at 13. David Shultz
acted as the controller for both entities. Defs.' Opp'n. at 18-19.
Moreover, Hall and Shultz were listed on the signature card of each of
the entities' National City Bank accounts. Pls.' Facts, Ex. H (Defs.'
Ans.) No. 6. Also of significance, defendants acknowledge that Hall
possessed the authority to hire and terminate employees at both OBR and
Exact. Id. No. 9.
The business purposes of OBR and Exact overlap significantly.
Defendants contend otherwise, positing that OBR's focus has traditionally
been on masonry activities, while Exact was incorporated to do industrial
flooring work, Defs.' Opp'n at 10, which defendants submit "was not a
significant portion of the services performed by OBR at the time Exact
was incorporated in 1998, id.: see also Pls.' Mem. at 12;
Defs.' Facts ¶ 13. However, defendants concede that OBR was doing
some flooring work when Exact was established, and admits that "OBR . . .
[began] to move into that area more aggressively over the past several
years. Defs.' Opp'n at 10; Pls.' Facts, Ex. B at 98-99. Both companies
performed flooring work at the same time, Pls.' Facts, Ex. D at 98, and
when Exact ceased performing such work OBR assumed the flooring projects
Exact had been working on and has filled the void left by Exact's
departure from the field, id. At the time Exact came into
being, and thereafter, OBR performed masonry restoration work, in
addition to the application to masonry surfaces of a special coating and
paint. Pls.' Facts, Ex. B at 76. Interestingly, after Exact's creation it
expanded the scope of its work into the areas of "concrete restoration and coating, caulking, cleaning
and waterproofing." Id. at 76-77. Moreover, the bulk of the
work performed by the two companies while they were simultaneously
operating occurred in the same general geographic area Michigan
and Ohio. Defs.' Opp'n at 11. In fact, on a number of occasions, the
defendant companies worked on the same projects during the same year.
See Pls.' Mem. at 13.
The operations of OBR and Exact are also closely related. For example,
at least 25 individuals have worked for both OBR and Exact. Pls.' Facts,
Ex. J. Of these 25 individuals, 24 worked for both companies during the
same year. Id. In fact, some employees received weekly
paychecks from both OBR and Exact "in the same envelope." Pls.' Facts,
Ex. F at ¶ 5; see also Pls.' Facts, Ex. C at 52-53. It is
significant that some of these twenty-five employees were masonry
workers. Pls.' Facts, Ex. C at 101-102. Also critical is the
acknowledgment by one employee (John Hall) that he has worked for both
companies on the same days, work which included giving estimates to
prospective customers and making bids to obtain work for the two
companies to perform. Pls.' Facts, Ex. B at 15-16.
The two entities have also maintained offices at the same location.
Pls.' Facts, Ex. H at No. 3. On two occasions Exact leased office space
from OBR, Pls.' Facts, Ex. D at 16, which was done without the execution
of a written lease. Pls.' Facts, Ex. C at 28. Service of process in this
litigation was also accepted by the same individual at the same location
on behalf of both OBR and Exact. Pls.' Facts, Ex. I.
Extremely informative of the nature of defendants' relationship is the
fact that the two entities transferred funds to each other and loaned
money to one another on a number of occasions. Pls.' Facts, Ex. C at
75-78; Ex. H at No. 13. And interestingly, except for accounting entries
that were entered on the companies' internal books, the paper work normally
associated with such transactions was never generated. Pls.' Facts, Ex. C
at 79-80. In addition, neither company engaged in similar transactions
with any other entities. Id.
Further, both companies have used many of the same service providers in
conducting their business. They use the same accountant; Pls.' Facts, Ex.
D at 61; they are using the same law firm in this litigation; Pls.'
Facts, Ex. B at 89-90; they maintain accounts and lines of credit at the
same bank; Pls.' Facts, Ex. H at Nos. 5-6; and, both companies'
retirement and health insurance plans and their workers' compensation
insurance are maintained through the same entities. See
Pls.'Mem. at 15.
All of the R.C. Tile factors therefore weigh in favor of a
finding that an alter ego relationship exist between OBR and Exact.
Although ownership of Exact is officially registered to Debra rather than
Duane Haas, as demonstrated above common ownership of the two entities
lies with Duane Haas. They shared management personnel who performed the
same duties for each company. They have essentially provided the same
type of construction services, and when Exact stopped doing industrial
flooring work OBR assumed Exact's obligations and became an active
participant in that field. See R.C. Tile. 353 F.3d at 959
(finding an alter ego relationship where "[o]n several occasions R.C.
Tile assumed R.C. Construction's subcontracts and completed work begun by
R.C. Construction."). They also simultaneously operated in the same
general geographic area (Ohio and Indiana). A number of employees (25)
have worked for both companies, several working for both during the same
week. And several of these employees performed the same work for the two
entities. Id. (R.C. Tile employed many of the tile-setters who
work for R.C. Construction.). The companies have had offices at the same
location at the same time. In addition, OBR has leased office space to Exact
without executing written lease agreements. See Laborers' Pension
Trust Fund v. Sidney Weinberger Homes. Inc., 872 F.2d 702, 705 (6th
Cir. 1988) (failure to respect formalities in dealings between
individuals and wholly owned company is indicative of alter ego status)
(cited in R.C. Tile. 353 F.3d at 961). The two entities
transferred funds to each other and made loans to each other without the
documentation normally associated with such transactions. See
id R.C. Tile. 353 F.3d at 959 ("The assets were transferred
among [the companies] in non-arms length transactions, which provides a
`clear foundation for a holding of'alter ego' status.'") (citing
Central States. Southeast & Southwest Areas Pension Fund v.
Sloan, 902 F.2d 593, 597 (7th Cir. 1990)). Finally, they have also
used the same service providers in the operation of their businesses. All
of these findings, which are based on undisputed record evidence,
conclusively indicate that alter ego status exists between OBR and
Exact.*fn12 See e.g., R.C. Tile, 353 F.3d at 959-60;
C.E.K. Industrial Mechanical v. NLRB, 921 F.2d 350, 355 (1st
C. Exact's Obligation to Comply with the Collective Bargaining
The parties disagree about what the Court's next step is upon having
concluded that alter ego status exist between OBR and Exact. Plaintiffs
argue that this finding automatically obligates Exact to make the
employee contributions to the Fund as required by the CBA to which OBR is
a signatory. On the other hand, defendants opine that the Court must now
assess whether OBR and Exact constitute a single employer and whether the
two entities' employees constitute a single appropriate bargaining unit, before Exact can be held to be bound
by the CBA. The Court agrees with plaintiffs' position, but for reasons
other than the reason plaintiffs advance.
As the Third Circuit explained in Stardyne, Inc. v. NLRB,
41 F.3d 141 (3rd Cir. 1994), "if two entities are found to be alter egos, a
collective bargaining agreement covering one entity is automatically
deemed to cover the other." Id. at 145 (citing Howard
Johnson Co. v. Detroit Local Joint Executive Bd. Hotel & Restaurant
Employees, 417 U.S. 249, 259 n.5 (1974) (emphasis added). Commenting
on legal implications resulting from the existence of alter ego status
between corporations, the Supreme Court in Howard Johnson
[s]uch cases involve mere technical change in the
structure or identity of the employing entity,
frequently to avoid the effect of the labor laws,
without any substantial change in its ownership or
management. In these circumstances, the courts
have had little difficulty holding that the
successor is in reality the same employer and is
subject to all the legal and contractual
obligations of the predecessor . . .
417 U.S. at 259 n.5 (citations omitted). And while the Howard
Johnson Court was only addressing the alter ego doctrine in the
successor corporation context, it is clear that the doctrine has equal
application to parallel entities. Belmont, 353 F.3d at 959.
Moreover, as noted above, although the Court in Howard Johnson
indicated that the alter ego doctrine has been employed "frequently to
avoid the affect of the labor laws . . .," 417 U.S. at 259 n.5, the
Circuit Court made clear in R.C. Tile that in this Circuit
"[a]nti-union animus may be a reason one entity should be deemed the
alter ego of another for the purpose of assigning liability under ERISA,
but the absence of anti-union animus certainly does not establish that the
two entities are not alter egos." 353 F.3d at 900.
Thus, the Court's finding that Exact is the alter ego of lOBR
automatically imposes OBR's obligations under the CBA on Exact. Although
the Court has been unable to locate any District of Columbia Circuit
cases that have explicitly stated what the Third Circuit held in
Stardyne regarding automatic liability under a CBA attaching to
non-signatory entities found to be alter egos of signatory entities, 41
F.3d at 141, this is exactly what the Circuit Court did in R.C.
Tile, 353 F.3d at 953 (citing Belmont, 139 F.3d at 309);
see also. Flynn v. Thibodeaux Masonary, Inc., ____ F. Supp.2d
____, 2004 WL 722651 (D.D.C. March 30, 2004). Accordingly, the Court
holds that Exact is required to make the employee contributions to the
Fund as agreed to by OBR when it entered into the CBA that is the subject
of this dispute.
Plaintiffs contend that they are entitled to an award of
$460,215.20*fn13, which includes the delinquent payments*fn14 and
interest as of the date of the filing of their summary judgment motion
(June 30, 2003). On the other hand, defendants argue that its entitled to
a set-off because in addition to paying its employees' salaries, it also
paid their health insurance, which is a "benefit that union workers . . .
ordinarily receive from the union, funded by contributions to the union's
pension fund." Defs.' Opp'n at 40. Defendants therefore opine that
additional evidence must be submitted to the Court before a damage award
may be made. Defendants' position conflicts with the law of this Circuit, see
R.C. Tile. 353 F.3d at 960-61, the position taken by the Supreme
Court in an analogous situation, see Walsh v. Schlecht,
429 U.S. 401 (1977), and other Circuits that have addressed the subject,
see O'Hare v. General Marine Transport Corp., 740 F.2d 160, 170
(2nd Cir. 1984); Brogan v. Swanson Painting Co., 682 F.2d 807,
809 (9th Cir. 1982); Audit v. Rolfson, 641 F.2d 757, 761 (9th
Cir. 1981); Local 9. International Union of Operating Engineers.
AFL-CIO, 458 F.2d 1313-16 (10th Cir. 1972). In R.C. Tile,
the alter ego employer argued that it should not be required to make the
employee contributions as called for in the CBA because it "was required
by California law to, and did, pay its non-union employees `prevailing
wages (which is the same as union scale wages, including trust fund
contributions.).'" 353 F.3d at 960-61. Rejecting the employer's argument,
the District of Columbia Circuit commented that "[e]ven assuming the
truth of that assertion . . . such payments do not absolve [the employer]
of its obligations to make contributions to the Fund pursuant to the
CBA." Id. (citations omitted). Thus, the Circuit Court held
that "[p]ayments made to non-union employees in lieu of contributions to
the Fund do nothing to remedy the harm to the Fund from the non-payment
of the pension contributions due under the CBA." Id. at 961.
See also. Mullins v. Kaiser Steel Corp., 642 F.2d 1302, 1310-11
n. 8 (D.C. Cir. 1980), rev'd on other grounds, 455 U.S. 72 (1982). The
Court must therefore reject Exact's position that it is entitled to a
set-off. III. Conclusion
Based upon the compelling evidence offered by plaintiffs, the Court
concludes that Exact is the alter ego of OBR. This conclusion
automatically binds Exact to the terms of the collective bargaining
agreement to which OBR is a signatory. And, because Exact is not entitled
to a set-off for payments it has made to its employees that would
otherwise have been made to the Fund as employee contributions pursuant
to the terms of the collective bargaining agreement, summary judgment is
entered against defendants for the amount of contributions defendants
were obligated to make pursuant to the collective bargaining agreement,
plus any interest payments plaintiffs are entitled to receive.*fn15
SO ORDERED on this 7th day of May, 2004.*fn16