Crane v. Green & Freedman

• Court: Court of Appeals for the First Circuit
• Decided: January 22, 1998
• Docket: 97-1133
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT



                                 ____________________



        No. 97-1133



                             SANDRA CRANE, FUND MANAGER,



                                Plaintiff, Appellant,



                                          v.



                    GREEN & FREEDMAN BAKING COMPANY, INC., ET AL.,



                                Defendants, Appellees.



                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                   [Hon. Edward F. Harrington, U.S. District Judge]
                                               ___________________



                                 ____________________



                                        Before



                                 Selya, Circuit Judge,
                                        _____________



                     Coffin and Campbell, Senior Circuit Judges.
                                          _____________________



                                 ____________________



            David  C.  Jenkins,  with  whom  Matthew  E. Dwyer,  Christine  L.
            __________________               _________________   _____________

        Nickerson and Dwyer & Jenkins, P.C. were on brief for appellant.
        _________     _____________________

            Adam S. Elman for appellees.
            _____________

                                 ____________________



                                   January 20, 1998

                                 ____________________



CAMPBELL, Senior  Circuit Judge.   The  terms of  a
                                _____________________



            collective  bargaining agreement  required  Green &  Freedman



            Baking Company, a Massachusetts corporation, to make periodic



            payments  on  behalf of  its  unionized  drivers to  the  New



            England Teamsters  and Baking  Industry  Health Benefits  and



            Insurance Fund.   After experiencing financial  difficulties,



            Green & Freedman ceased to make the agreed-upon contributions



            and  transferred all remaining  assets to a  successor entity



            named Boston  Bakers, Inc.   The Fund  Manager of  the Health



            Benefits and Insurance  Fund (referred to hereinafter  as the



            "Health Fund") thereupon sued Green & Freedman, Boston Bakers



            and the  two  corporations'  principals,  Richard  Elman  and



            Stanley Elman, in the district  court to recover the payments



            owed by Green & Freedman with interest, costs  and penalties.


Both  corporate defendants  conceded liability  for



            the delinquent  contributions owed by Green & Freedman to the



            Health  Fund.     The  Elmans,  however,  denied   they  were



            personally liable for these corporate debts, and a jury trial



            took place to  determine that issue.   After the presentation



            of evidence, and before submission to the jury, the  district



            court entered judgment  as a matter  of law  in favor of  the



            Elmans,  pursuant to Federal  Rule of Civil  Procedure 50(a).



            The Health Fund appeals.   We affirm in  part and reverse  in



            part. 


-2-



I.        Background
                      __________



                      Defendant-Appellee Green &  Freedman Baking Company



            ("Green  &  Freedman")   was  a  family-owned   Massachusetts



            corporation formed in 1934 that produced and sold baked goods



            until,  on  January  15,  1993,  its  remaining  assets  were



            transferred  in bulk to Appellee Boston Bakers, Inc. ("Boston



            Bakers").    Boston  Bakers  operated  essentially  the  same



            business as Green & Freedman until its demise in 1995.  



                      Starting  in  1975,  responsibility   for  Green  &



            Freedman's affairs  rested with  Defendants-Appellees Stanley



            Elman  and Richard  Elman, grandsons  of one  of the  company



            founders.  Stanley Elman started working for Green & Freedman



            in  1959 and  by 1969  became its  treasurer and  a director,



            positions  he occupied through  the end of  the corporation's



            and  its successor's  existence.   Richard  Elman began  with



            Green &  Freedman in 1964 and  served as its President  and a



            director from 1975.  



                      Prior to  transferring its assets  to Boston Bakers



            as of January 15, 1993,  Green & Freedman employed between 12



            and 18 truck  drivers who were members of  the Bakery Drivers



            and Helpers Local 494.   The union drivers' wages, hours, and



            conditions  of  employment  were  governed  by  a  collective



            bargaining  agreement between the Union and Green & Freedman,



            effective from May 5,  1991 to May 1,  1994.  That  agreement



            required Green  &  Freedman to  contribute $88  per week  for


-3-



every  covered worker to the New England Teamsters and Baking



            Industry  Health Benefits  and Insurance  Fund.   The  Health



            Fund's  contractual  right to  contribution  was additionally



            protected by   515 of the Employee Retirement Income Security



            Act ("ERISA"),  29 U.S.C.    1145 (1985),  which doubles  the



            obligation  of  any  employer who  promises  in  a collective



            bargaining agreement to make contributions to a multiemployer



            benefits or pension plan.



                      From  1991, Green &  Freedman began to  suffer what



            the  Elmans   described   as  a   serious,   and   ultimately



            irreversible, decline  in sales  and profits.   Beginning  in



            April  1992, and continuing until its business was terminated



            in  January 15,  1993, Green  & Freedman  stopped making  its



            required  contributions  to   the  Health  Fund.     Green  &



            Freedman's  unpaid  contributions for  this  period, totaling



            $39,776, are  the  basis for  the liability  the Health  Fund



            seeks to impose in this action.



                      By  December  1992,  the  Elmans  had  decided   to



            transfer all of  Green & Freedman's assets to  a newly-formed



            corporate shell entitled Boston Bakers, Inc., pursuant to the



            bulk  transfer  provisions   of  the  Massachusetts   Uniform



            Commercial Code.  See Mass. Gen. Laws ch. 106,    6-101 to 6-
                              ___



            110 (1990), repealed,  Mass. Acts 1996 ch. 160,    3 (1996).1
                        ________



                                
            ____________________



            1.  Although  repealed  in  1996,  the  former  Massachusetts

            U.C.C. Article 6  still applies to bulk  transfers that, like

            the  Boston Bakers transaction, occurred prior to the repeal.



                                         -4-



Boston  Bakers was simply a continuation of Green &



            Freedman's  business.  Its  nominal and sole  shareholder was



            Claire  Lank, a long-time Green & Freedman employee installed



            by  the  Elmans.   The  Elmans  were  designated as  the  new



            corporation's  officers and, along  with their wives,  as its



            directors.   A voting trust  with Lank enabled the  Elmans to



            continue exercising  complete control  of Green  & Freedman's



            assets, once transferred, in the form of Boston Bakers.



                      The bulk transfer shifted all of Green & Freedman's



            assets,  which were then worth somewhere between $480,000 and



            $500,000,  to  Boston  Bakers.   In  exchange,  Boston Bakers



            assumed Green  & Freedman's secured debt.   The secured debt,



            which totaled $498,498.17, was owed to two secured creditors:



            U.S.  Trust, the company's  institutional lender, and  the 75



            Old  Colony Avenue Realty Trust  (the "Realty Trust"), a real



            estate trust that owned the  company's plant for the  benefit



            of the Elmans.  U.S. Trust held a security interest in all of



            Green &  Freedman's property, both  then-owned and thereafter



            acquired, while  the  Realty Trust  held  a mortgage  on  the



            plant.  



                      As  part of the  bulk transfer, Boston  Bakers gave



            Green & Freedman a promissory  note, which Boston Bakers held



            for  the benefit of  Green & Freedman's  unsecured creditors,



            worth  $32,798.99.  That amount left the unsecured creditors,



                                
            ____________________



            See 1996 Mass. Acts ch. 160,   5.
            ___



                                         -5-



including the  Health Fund,  with claims  worth roughly  five



            cents on the dollar. 



                      As  required by law,  Green & Freedman,  after some



            hesitation,  announced the bulk transfer to creditors in late



            December 1992 and  provided a list of its assets.   See Mass.
                                                                ___



            Gen. Laws  ch. 106,     6-104 to 6-106, repealed,  Mass. Acts
                                                    ________



            1996  ch. 160,    3.   The Health Fund  responded by bringing



            this  action in  the  federal district  court  which, in  its



            initial form, sought,  inter alia,  a preliminary  injunction
                                   _____ ____



            against the transfer  of Green & Freedman's  assets, alleging



            the transfer to  violate ERISA   515,  29 U.S.C.   1145.   On



            January  12,  1993,  the  district  court  denied  injunctive



            relief.  Three days later, the bulk transfer was consummated.



                      Boston Bakers thereafter carried on business in the



            same manner as Green &  Freedman.  Employing the same workers



            and equipment at  the same plant, it produced  the same kinds



            of baked goods for the same customers.  Boston  Bakers was as



            unprofitable as Green & Freedman.  After two-and-a-half years



            of  continued difficulties, U.S. Trust foreclosed, and Boston



            Bakers closed its doors in August 1995.  According to Richard



            Elman's  testimony, which  was not  contradicted, the  Elmans



            personally received no distribution in settling the company's



            affairs.  


-6-



Following the liquidation of Boston Bakers' assets,



            the  Health Fund filed an amended complaint2 seeking recovery



            of  the delinquent contributions  from both corporations, and



            from Richard  Elman and Stanley  Elman as well.   As Green  &



            Freedman  had   done  previously,   Boston  Bakers   conceded



            liability  for the contributions  Green & Freedman  failed to



            make  to the  Health  Fund  from April  1992  until the  bulk



            transfer on January 15, 1993.   With the assets of both Green



            &  Freedman  and  Boston  Bakers completely  liquidated,  the



            Health Fund looked  to the Elmans personally for  recovery of



            Green & Freedman's delinquent contributions.   Count 3 of the



            Health Fund's  Second  Amended  Complaint  alleged  that  the



            Elmans were personally  liable as the "'alter  egos' of Green



            and  Freedman."    Count  4  premised  the  Elmans'  personal



            liability  on their  disregard for  Boston Bakers'  corporate



            identity,  alleging  that  the Elmans  completely  controlled


____________________



            2.  An  amended complaint dated March 1, 1995, was superseded

            by a  Second Amended Complaint dated July  14, 1995.  In both

            complaints,  the  Health  Fund sought  recovery  for  Green &

            Freedman's  defaulted  payments   due  under  the  collective

            bargaining  agreement  for  the  period  April  1992  through

            January 15, 1993,  totaling $39,770,  exclusive of  interest,

            costs and liquidated damages.  Recovery from Green & Freedman

            was sought under the contract,  and from Boston Bakers on the

            theory  that, as  a  successor entity  to  Green &  Freedman,

            Boston  Bakers was obligated to remit the latter's delinquent

            contributions.  Recovery  from the two Elmans  personally was

            sought because  they were allegedly  "alter egos" of  Green &

            Freedman,  and  because  they  allegedly  established  Boston

            Bakers  with  fraudulent intent,  exercised  complete control

            over  it  (although  owning no  stock),  and  disregarded its

            corporate identity.



                                         -7-



Boston  Bakers and created  it with fraudulent  intent.  Both



            parties requested a trial by jury.



                      At trial,  the  Health Fund  called Stanley  Elman,



            Richard  Elman,   and  Richard's  wife,   Barbara  Elman   as



            witnesses.  Counsel for the Elmans declined cross-examination



            at  the time, planning to call  the Elmans later as their own



            witnesses.   The Health  Fund also introduced  the deposition



            testimony  of   Claire  Lank,  who  had  served  as  Green  &



            Freedman's secretary before being installed as Boston Bakers'



            nominal  shareholder.  In addition, the parties stipulated to



            the  admission of  many  documents recording  the  collective



            bargaining  agreement, the creation of Boston Bakers, and the



            operation of Green & Freedman. 



                      At the  close of  the Health  Fund's case-in-chief,



            the Elmans moved for  judgment in their favor as  a matter of



            law pursuant to  Rule 50(a).  The district  court granted the



            motion  with respect to Count 3  and the liability of Green &



            Freedman, ruling that the Health  Fund had failed to meet the



            criteria  stated in  Alman v.  Danin,  801 F.2d  1 (1st  Cir.
                                 _____     _____



            1986), for  corporate veil-piercing  in an  ERISA case.   The



            court left  open for the  time being the Health  Fund's claim



            that the  Elmans were  personally liable  for Boston  Bakers'



            liability. 



                      The defense then called as its only witness Richard



            Elman,  who testified  about the  creation  and operation  of


-8-



Boston  Bakers.  The Elmans renewed their motion for judgment



            as a matter  of law.   Again relying  on Alman, the  district
                                                     _____



            court allowed the motion.  



                      The  Health  Fund  now  appeals  from  the district



            court's grant of judgment as a matter of law.



            II.       Standard of Review
                      __________________



                      To review a  grant of judgment as a  matter of law,



            we stand in the district court's shoes and may affirm only if



            the evidence did not furnish a  "legally sufficient basis for



            a reasonable jury to find" for the non-moving party.  Fed. R.



            Civ.  P. 50(a)(1);  see  also Coyante  v.  Puerto Rico  Ports
                                _________ _______      __________________



            Auth.,  105 F.3d  17,  21  (1st Cir.  1997).   This  standard
            _____



            requires more than "a mere scintilla" of evidence in the non-



            moving party's favor.   Fashion House, Inc. v.  K Mart Corp.,
                                    ___________________     ____________



            892 F.2d  1076,  1088  (1st Cir.  1989).    Every  reasonable



            inference, however, must be drawn in favor  of the non-moving



            party.   See Favorito v. Pannell,  27 F.3d 716, 719 (1st Cir.
                     ___ ________    _______



            1994). 



                      In the instant appeal, we must decide whether there



            was a legally sufficient basis  in the evidence presented for



            a reasonable jury to have  pierced the corporate veils and to



            have imposed  personal liability  on the  two Elmans  for the



            conceded indebtedness to the Health Fund of both companies.



                      The legal standard  for when it is proper to pierce



            the corporate  veil is notably  imprecise and fact-intensive.


-9-



Leading commentators state that "no  hard and fast rule as to



            the  conditions under  which the  [corporate]  entity may  be



            disregarded  can  be stated  as  they vary  according  to the



            circumstances  of each case," William M. Fletcher, 1 Fletcher
                                                                 ________



            Cyclopedia of the Law of Private Corps.   41.30, at 662 (1990
            _______________________________________



            rev.   ed.),  and,  more  skeptically,  that  "[t]here  is  a



            consensus  that  the  whole area  of  limited  liability, and



            conversely of  piercing the corporate veil, is among the most



            confusing in corporate law," Frank H. Easterbrook & Daniel R.



            Fischel, Limited Liability and the Corporation, 52 U. Chi. L.
                     _____________________________________



            Rev. 89, 89 (1985).  



                      Because a rigid test could not account for all  the



            factual variety, the  federal common law standard  adopted in



            our Circuit for measuring  an ERISA plaintiff's veil-piercing



            claim is somewhat  open-ended.  We said in  Alman that courts
                                                        _____



            should  consider  "the  respect  paid   by  the  shareholders



            themselves  to   [the]  separate   corporate  identity;   the



            fraudulent  intent of  the  [individual defendants];  and the



            degree of injustice that would be visited on the litigants by



            recognizing the corporate  identity."  Alman, 801  F.2d at 4.
                                                   _____



            Of these three elements, "a finding of some fraudulent intent



            is a sine qua non to the  remedy's availability."  See United
                                                               ___ ______



            Elec.,  Radio  and  Machine Workers  v.  163  Pleasant Street
            ___________________________________      ____________________



            Corp., 960 F.2d 1080, 1093 (1st Cir. 1992).  
            _____


-10-



Before  examining the  district court's  Rule 50(a)



            ruling in  light of these  criteria, we need to  consider yet



            another problem.   The ERISA cause of action  under which the



            Health  Fund sued here, ERISA   515(a)(1)(3), authorizes only



            injunctive or  "other  appropriate  equitable  relief."    29
                                                _________



            U.S.C.      1132(a)(1)(3)  (emphasis  added).    Courts  have



            interpreted this cause  of action as providing no  right to a



            jury trial,  even when the  relief sought is monetary.   See,
                                                                     ____



            e.g., Spinelli v. Gaughan, 12  F.3d 853, 855 (9th Cir. 1993).
            ____  ________    _______



            As a  result, Alman  and other federal  precedent were  bench
                          _____



            proceedings in  which the judge  determined both the  law and



            the  facts.   No  consideration  was  given to  the  separate



            responsibilities of judge  and jury in the  applying of veil-



            piercing criteria.  



                      The  jury trial  here,  not  being  of  right,  was



            undertaken  by the judge  with the  consent of  both parties.



            Federal Rule  of Civil  Procedure 39(c),  allows  a judge  to



            order a  consensual jury trial  in actions not triable  as of



            right by a  jury.  In such  cases, the "verdict has  the same



            effect as if trial by  jury had been a matter of right."  Id.
                                                                      ___



            Accordingly,  in reviewing  the district  court's Rule  50(a)



            determination, we are  supposed to apply the  same principles



            as if the jury  trial had been one  of right.  We must  do so



            here,  however,  without  the  benefit  of   ERISA  precedent



            instructing on whether, and to  what  degree, the jury rather


-11-



than  the judge is  responsible for applying  the Alman veil-
                                                              _____



            piercing factors.  



                      While the absence of ERISA precedent on this aspect



            is somewhat troubling, we conclude that, in a consensual jury



            trial, it  is principally the  jury's function,  and not  the



            court's, to  decide whether  or not  the Alman  veil-piercing
                                                     _____



            standards  were  met.    The  jury,  to  be  sure,  can  find



            individual  liability  only  if  the  evidence  is  minimally



            sufficient  to  do  so under  Alman  criteria.   Whether  the
                                          _____



            evidence reaches  that threshold is  a question of law.   But



            given the issue's fact-intensive nature, the legal  threshold



            of evidentiary sufficiency is a relatively low one.



                      In reaching the above conclusion, we are influenced



            by  the fact that federal courts,  outside the ERISA context,



            have  held that veil-piercing  "is the sort  of determination



            usually made by a jury because it is so fact specific."   Wm.
                                                                      ___



            Passalacqua  Builders, Inc. v.  Resnick Developers  S., Inc.,
            ___________________________     ____________________________



            933 F.2d  131, 137 (2d Cir. 1991); see also FMC Finance Corp.
                                               ________ _________________



            v. Murphree, 632 F.2d 413, 421 & n.5 (5th Cir. 1980) (holding
               ________



            that, as  a matter of  federal procedure in  diversity cases,



            "the  issue  of corporate  entity  disregard is  one  for the



            jury").   Most state courts  adopt a similar approach.   See,
                                                                     ____



            e.g., Pepsi-Cola Metropolitan Bottling Co. v. Checkers, Inc.,
            ____  ____________________________________    ______________



            754  F.2d 10, 14 (1st Cir. 1985)(applying Massachusetts law);



            Castleberry  v. Branscum,  721 S.W.2d  270,  277 (Tex.  1986)
            ___________     ________


-12-



(treating  veil-piercing  as  factual  and,  therefore,  jury



            question).    Courts in  these jurisdictions  have emphasized



            that  "[t]he conditions under which the corporate entity will



            be disregarded vary according to the circumstances present in



            each  case."    Electric  Power  Bd.  v.  St.  Joseph  Valley
                            ____________________      ___________________



            Structural Steel  Corp., 691  S.W.2d 522,  526 (Tenn.  1985).
            _______________________



            Even  where veil-piercing  is decided  by  judge rather  than



            jury,  the  courts   have  held  that  the   question,  while



            equitable, is one of fact.   See, e.g., Smetherman v. Wilson,
                                         _________  __________    ______



            626 So.2d 71,  73 (La. Ct. App. 1993)  (explaining that trial



            judge  decides   whether  to  pierce   corporate  veil  after



            examining the "totality  of the circumstances").   Indeed, in



            Alman we  reviewed the  district court's determinations  that
            _____



            the  individual defendants "had acted in  bad faith" and "had



            not   respected  [corporation's]   separate  existence   even



            minimally" as  "inferences" subject to  the clearly-erroneous



            review accorded issues of fact.  801 F.2d at 4; see also Pipe
                                                            ________ ____



            Fitters Health and Welfare Trust v. Waldo, R., Inc., 969 F.2d
            ________________________________    _______________



            718, 721  (8th  Cir.  1992)  (reviewing  ERISA  veil-piercing



            decision for clear error).  



                      In  assigning  veil-piercing  here  largely to  the



            jury,  we are  also  influenced by  the  fact that,  although



            entitled  to a  bench  trial, the  parties agreed  to proceed



            before a jury.  This choice would be next to meaningless were



            we  now to  hold that  the principal  contested issue  -- the


-13-



Elmans' personal liability  -- remained one for the  court to



            determine.   Given a Rule  39(c) election to proceed  by jury



            trial,  other courts  have held that  the district  court may



            relegate all factual  determinations to the jury,  even those



            normally  treated as equitable.  See,  e.g., Gloria v. Valley
                                             __________  ______    ______



            Grain  Prods.,  Inc., 72  F.3d  497,  499  (5th  Cir.  1996);
            ____________________



            Thompson v.  Parkes, 963 F.2d  885, 888 (6th Cir.  1992); cf.
            ________     ______                                       ___



            McCain  Foods, Inc.  v. St.  Pierre, 463  A.2d 785,  787 (Me.
            ___________________     ___________



            1983)(holding that veil-piercing,  while normally in Maine  a



            matter for the court, was  properly submitted to jury under a



            state rule parallel  to Fed. R. Civ. P. 39(c)).  The point of



            Rule 39(c)'s jury-by-consent provision has been said to be to



            allow parties who  so wish to have  disputed facts, including



            ultimate facts, resolved by a  jury.  See generally 9 Charles
                                                  _____________



            A. Wright &  Arthur R. Miller, Federal Practice and Procedure
                                           ______________________________



              2333 (1995). 



                      As the  veil-piercing determination  is principally



            for the  jury to make,  we shall affirm the  district court's



            grant  of judgment  for the  individual  defendants only,  as



            previously  noted,  if  we determine  there  was  no "legally



            sufficient  basis  for a  reasonable  jury to  find"  for the



            plaintiff  Health Fund.  (Our review standard would obviously



            be different  were veil-piercing  regarded as  a legal  issue



            relegated to the judge even in a jury trial.)


-14-



We  turn  now  to  the  evidence  presented  below,



            inquiring whether jury  issues were presented concerning  the



            Elmans' personal  liability,  first, for  Green &  Freedman's



            obligations to the Health Fund, and, second for Boston Bakers



            responsibility for those same obligations.



            III.      Piercing the Corporate Veil: Green & Freedman
                      _____________________________________________



                      We hold  that, on  the record  before the  district



            court  its decision to take from the jury the question of the



            Elmans'   liability   for  Green   &   Freedman's  delinquent



            contributions was  erroneous and  must be vacated.   We  find



            ample  evidence to  afford a  reasonable  jury, applying  the



            Alman  criteria,  801 F.2d  at  4, and  exercising  its broad
            _____



            authority  over  the  veil-piercing issue,  supra,  a legally
                                                        _____



            sufficient basis to reach beyond Green & Freedman's corporate



            identity and  hold the  Elmans liable  for the  corporation's



            unpaid contributions.  



                      A.   Fraudulent Intent
                           _________________



                      As previously  noted, "the cases  that permit  veil



            piercing in the ERISA milieu  all emphasize that a finding of



            some  fraudulent intent  is a  sine qua  non to  the remedy's



            availability."   United Elec., Radio and Machine Workers, 960
                             _______________________________________



            F.2d at  1093.  We explained in that  case that, in the ERISA



            veil-piercing  sense, fraud need  not reach the  level needed



            for  criminal or even  independently actionable  civil fraud.



            Still, it has to be more than "invisible."  Id. 
                                                        ___


-15-



There was  evidence that the Elmans,  through their



            domination of  Green &  Freedman, caused  the corporation  to



            make  payments to  themselves and their  relatives at  a time



            when the  corporation was  known to be  failing and  could be



            expected to  default,  or  was  already in  default,  on  its



            obligations  to the  Health Fund.   These  payments  could be



            found  to lack  any  business  justification.    Courts  have



            routinely viewed  the wrongful diversion of  corporate assets



            to  or  for  controlling  individuals  at  a  time  when  the



            corporation  is in  financial distress  as  a fraud  that can



            justify  piercing the corporate  veil.  See,  e.g., Laborers'
                                                    __________  _________



            Pension Trust Fund v. Sidney Weinberger Homes, Inc., 872 F.2d
            __________________    _____________________________



            702, 705  (6th Cir.  1988) (per  curiam)(piercing veil  where



            shareholder withdrew corporate funds at time of dissolution);



            Lowen v. Tower  Asset Management, Inc.,  829 F.2d 1209,  1221
            _____    _____________________________



            (2d   Cir.  1987)   (holding   individuals  responsible   for



            fiduciary's  ERISA  violations  on  evidence  of   "extensive



            intermixing  of  assets  . .  .  among  the corporations  and



            individual  defendants"); Labadie Coal Co. v. Black, 672 F.2d
                                      ________________    _____



            92,  98-99 (D.C.  Cir.  1982)  (instructing  trial  court  to



            consider  defendants'  diversion   of  corporate  assets   to



            personal  uses); I.A.M.  National Pension  Fund v.  Wakefield
                             ______________________________     _________



            Indus.,  Inc., 14 Employee  Benefits Cas. (BNA)  1890 (D.D.C.
            _____________



            1991)  (piercing employer's corporate  veil under ERISA based



            in  part on "selective  diversion of corporate  assets"); see
                                                                      ___


-16-



generally 1  William M.  Fletcher, Cyclopedia of  the Law  of
            _________                          __________________________



            Corporations    41.30, at 663 (listing among relevant factors
            ____________



            "siphoning  of corporate funds  by dominant stockholders" and



            "the use of corporate funds  to pay personal expenses without



            proper accounting").



                      The  Health Fund introduced a series of checks that



            the  Elmans made out  to themselves  from Green  & Freedman's



            corporate accounts.   These checks dated from January 1991 to



            January 1993,  a period  during which,  according to  Richard



            Elman,  Green &  Freedman "was  in  trouble," "los[ing]  some



            money,"  and experiencing a  "decline in profits  and sales."



            In the  last few  months of this  period,   Green &  Freedman



            ceased to  be able  to pay its  debts including  its required



            contributions to  the Health Fund.   It then  transferred its



            assets to Boston Bakers.



                      Meanwhile, the  Elmans had been  writing themselves



            and their relatives checks  for no business purpose that  the



            Elmans could adequately  explain.  When questioned  about one



            of   these  payments,   Richard  Elman  testified   that  the



            corporation was  repaying him  an unrecorded  loan --  itself



            evidence  weighing in favor  of piercing the  corporate veil,



            see United States v.  Pisani, 646 F.2d 83, 88 (3d  Cir. 1981)
            ___ _____________     ______



            (piercing   corporate   veil  on   basis   of   repayment  of



            shareholders' loan at  time when corporation was  failing) --


-17-



before stating that he could  not remember the purpose of the



            payment.  



                      Particularly  flagrant  was   the  evidence  of   a



            personal  vacation that  the  Elmans financed  with corporate



            funds.  In  January 1991, the Elmans caused  Green & Freedman



            to pay for them to travel to New Orleans, where they attended



            the  Super  Bowl.    On  direct  examination,  Stanley  Elman



            testified that  the checks  in question  represented "payment



            for expenses and conducting business."  On cross-examination,



            however,  Stanley Elman admitted that Green & Freedman had no



            customers in Louisiana and did no business in connection with



            the  Super  Bowl.    Nothing  in  Stanley  Elman's  testimony



            rehabilitated his initial claim that he conducted business on



            the Super Bowl trip.  



                      In  addition, the Elmans caused Green & Freedman to



            pay Eleanor Elman, Stanley Elman's  wife, three checks for  a



            total of  $4,500.   Stanley Elman  initially explained  these



            payments as wages.   However, the Elmans did  not report this



            amount on  their tax  return and there  was no  evidence that



            Green &  Freedman reported  it as wages.   Moreover,  Green &



            Freedman's receptionist, Claire Lank,  testified that Eleanor



            Elman did not work at Green & Freedman during 1992.



                      Finally, just days before Green & Freedman executed



            the bulk transfer to  Boston Bakers, and at  a time when  the



            company had  ceased  to meet  its obligations  to the  Health


-18-



Fund,  the  Elmans   caused  the  corporation  to   write  an



            unexplained check  for cash in  the amount of $10,000,  and a



            second check payable to Stanley Elman for $2,500.  



                      The payments made by Green & Freedman to the Elmans



            and their  relatives during 1991  and 1992  with no  apparent



            business justification amounted to $30,109.  In ruling on the



            Elmans' Rule 50(a) motion, the district court was required to



            draw all reasonable inferences and resolve credibility issues



            in favor of  the non-movant Health  Fund.  Looked at  in this



            light,   the  evidence  was  sufficient  to  support  a  jury



            determination  that the Elmans  had used corporate  funds for



            personal  purposes at  times when they  knew either  that the



            company was inadequately capitalized to meet its obligations,



            or  that,  in  fact,  it had  stopped  doing  so  --  and, in



            particular,  had ceased to  pay its Health  Fund obligations.



            We add  that the jury's  ability to conclude that  the Elmans



            had acted  in a knowingly  fraudulent manner would  have been



            bolstered by  inconsistencies in the  Elmans' testimony about



            the payments,  particularly their  testimony  that the  Super



            Bowl trip and Eleanor Elman's "wages" had business purposes.



                      The  Elmans protest  that  the  amount of  arguable



            self-dealing evidenced  at trial  was too  little to  justify



            sending the Health Fund's case to the jury.  The Elmans point



            out  that the payments described  above amounted to less than



            one percent of the corporation's gross annual sales, and that


-19-



the trip to New Orleans was, after all, only one trip.  While



            it  is  difficult to  quantify  nicely  the amount  of  fraud



            required,  the  Elmans's  self-dealing  occurred  on  several



            occasions,  at  a time  when  the  company was  in  financial



            straits.   We cannot  say that this  conduct and  the amounts



            involved were  de minimis,  to the  point that no  reasonable



            jury could find that the fraudulent intent prong of the Alman
                                                                    _____



            standard was established.



                      B.   Disregard of Corporate Identity
                           _______________________________



                      The  fraudulent  self-dealing  just  discussed  was



            probative not only  of fraudulent intent but  also of another



            Alman  element,  disregard  of corporate  identity.    On the
            _____



            latter  score, there was  additional evidence.   For example,



            the Elmans appear to have mixed their own finances with those



            of Green &  Freedman's.  At a  time that the Elmans  owed the



            corporation $141,000 in  loans, they also loaned  it $170,000



            through  their real estate trust.  These unexplained dealings



            suggest that money  was being moved around with  little or no



            regard for  the corporate identity.   There was no  record of



            the  terms of  the purported  loans nor  of any  agreement to



            repay.  Undocumented  and interest-free loans could  be found



            to  show a  disregard for  the  corporate form.   See,  e.g.,
                                                              __________



            Uriarte, 736 F.2d  at 524 (treating unrecorded  and interest-
            _______



            free loans from  shareholders to the corporation  as evidence



            of shareholders' disrespect for corporate form).  


-20-



Beyond the  undocumented loans, there  was evidence



            of  inadequate and, indeed,  fraudulent record keeping.   The



            Elmans admittedly  falsified  Green &  Freedman's minutes  to



            state  that their  wives, who  served  as nominal  directors,



            attended and  authorized corporate  borrowing,  when in  fact



            their wives did neither.  



                      We accept  the Elmans'  contention that  a closely-



            held corporation need not hew to every corporate formality in



            order  to  maintain  its  shareholders'   immunity  from  the



            corporation's debts.    A veil-piercing  plaintiff  will  not



            prevail  if the  evidence shows  only  that the  closely-held



            defendant  corporation was run without the strict formalities



            of its publicly-held  counterpart.  But the  evidence adduced



            at trial, viewed most favorably  to the Health Fund, could be



            found  to show practices that went beyond mere informalities.



            Important  transactions  between   the  corporation  and  its



            controlling  shareholders  went  undefined,  and  the  Elmans



            appear  to  have created  false minutes.   These  facts, when



            added  to the  financial self-dealing  and  when viewed  in a



            light most favorable to the Health Fund, support a reasonable



            inference by a  jury that the Elmans, in the two years before



            Green & Freedman's demise, did  not treat Green & Freedman as



            a separate entity.  



                      C.   Manifest Injustice
                           __________________


-21-



The  evidence just  described under  the first  two



            Alman factors could also allow  a reasonable jury to conclude
            _____



            that  sheltering the Elmans from Green & Freedman's liability



            to  the Health  Fund  would  be manifestly  unjust.   As  one



            commentator has explained,  courts have found this  prong met



            when "a corporation  is so undercapitalized that it is unable



            to meet debts that may reasonably be expected to arise in the



            normal course of business."  Note, Piercing the Corporate Law
                                               __________________________



            Veil:   The Alter Ego  Doctrine Under Federal Common  Law, 95
            _________________________________________________________



            Harv.  L. Rev. 853,  855 (1982).   Thus, a jury  would not be



            unreasonable  in viewing  as  manifestly unjust  the  Elmans'



            decision  to  issue themselves  payments  for personal,  non-



            corporate purposes, as well as other unexplained payments, at



            a time when the corporation could not meet its obligations to



            the  Health Fund.  Of course, the mere non-payment of debt is



            not,  by itself,  enough to  justify  piercing the  corporate



            veil.  However, a jury could reasonably conclude on the basis



            of  the  evidence below  that  the Elmans  both  placed their



            personal    interests    ahead   of    their    corporation's



            responsibilities  and   did  not  themselves  honor  Green  &



            Freedman's corporate form.  As  a result, it could be thought



            manifestly  unjust  to   insist  that  the  Health   Fund  be



            restricted by the corporate form.



            IV.       Piercing the Corporate Veil:  Boston Bakers
                      ___________________________________________


-22-



Whether  the evidence sufficed  for a jury  to find



            the Elmans personally liable for Boston Bakers' successorship



            obligation  to pay Green & Freedman's indebtedness for Health



            Fund  contributions missed  in  April 1992,  through  January



            1993,  is  more  problematic.   Given  the  Elmans' potential



            direct liability, supra, for Green & Freedman's debts on this
                              _____



            score, the question of their tangential exposure for the same



            debt via Boston Bakers  may seem more theoretical than  real.



            Still, the court's ruling on  count 4 of the complaint raises



            the issue, and we must address it.



                      For  the showing of  fraud needed to  pierce Boston



            Bakers' corporate  veil, the  Health Fund  relies inter  alia



            upon the  Elmans' transfer  of Green  & Freedman's  assets to



            Boston   Bakers,  a   transaction  said   to  be   inherently



            fraudulent.   Yet we can  see nothing in the  transfer itself



            that further disadvantaged the Health Fund in  its ability to



            realize   its   claim   for   Green   &   Freedman's   unpaid



            contributions.           Had the Elmans chosen simply to shut



            down  the  operations of  Green  &  Freedman  in early  1993,



            instead of undertaking the bulk  transfer to Boston Bakers, a



            jury would have  to conclude that the Health  Fund would have



            received nothing.  At  the time of the bulk transfer,  it was



            undisputed that Green  & Freedman had no more  than $2,000 in



            cash  on  hand,  and liabilities  to  secured  creditors that
                                                  _______



            outweighed  its assets.  The firm's primary secured creditor,


-23-



U.S.  Trust, held  a  security  interest in  all  of Green  &



            Freedman's  assets.   Once  a  debtor  grants  an  all-assets



            security  interest, unsecured creditors  like the Health Fund



            are  made no worse off  by a bulk  transfer:  the transferred



            assets were already  encumbered and therefore  unavailable to



            the Health Fund regardless of the bulk transfer.



                      We  note   that  neither  in  its   second  amended



            complaint  nor in  arguments on  appeal, has the  Health Fund



            claimed  that Boston Bakers, as Green & Freedman's successor,



            was liable under the latter's collective  bargaining contract



            for  payments  after  January  15, 1993,  the  date  Green  &
                           _____



            Freedman shut  down.  Rather  the damages sought are  for the



            period from  April 1992,  until January  15, 1993,  being all



            based on  defaulted contributions  owed by  Green &  Freedman



            while it was  still operating.   Boston Bakers' liability  is



            premised  solely  on its  inherited responsibility  for these



            earlier  debts of  its predecessor.    As said,  had Green  &



            Freedman simply shut  down on  January 15,  1993, the  Health



            Fund would  apparently have been  no better off.   (It might,



            arguably,  have  been  worse off.)    Plaintiff  propounds no



            concrete  theory  as   to  how  the  bulk   transfer  further



            diminished  its prospects  for recovering  the  sums owed  by



            Green & Freedman between April 1992 and January 15, 1993.



                      It is  significant  that, from  the outset,  Boston



            Bakers continued openly  to carry on the  business of Green &


-24-



Freedman.    Lank,  Boston Bakers'  nominal  shareholder  and



            receptionist, even continued  to answer the phone  "Green and



            Freedman" after the bulk sale.  A company does not extinguish



            its  ERISA obligations  simply by  changing the  name on  its



            letterhead.   See  Hawaii Carpenters  Trust  Funds v.  Waiola
                          ___  _______________________________     ______



            Carpenter  Shop,  Inc., 823  F.2d  289, 294  (9th  Cir. 1987)
            ______________________



            (holding  that alter ego  test is  met when  two corporations



            share a  "substantial continuity"); cf. Guzman  v. MRM/ELGIN,
                                                ___ ______     _________



            409  Mass. 563, 566  (1991) (explaining exception  to general



            rule of  successor non-liability  for a  transferee that  "is



            merely a  continuation of  the seller  corporation").   Thus,



            Boston Bakers  was  available  throughout  its  existence  to



            answer for the liabilities of its predecessor.



                      At trial, the  Health Fund produced no  evidence as



            to  how the  bulk transfer  worked to  its disadvantage.   As



            Richard Elman's uncontradicted testimony put  it, by December



            1992,  Green & Freedman was in  such dire straits that it had



            to choose between liquidation and reorganization.  The Elmans



            chose the  latter  course,  and  undertook  a  reorganization



            through the bulk transfer.  



                      Further undercutting the  contention that the  mere



            fact of the bulk transfer demonstrates the Elmans' fraudulent



            intent is  the fact that  they did not conceal  the transfer.



            As  required  by  statute,  Green  &  Freedman  notified  its



            creditors, including  the Health Fund,  before executing  the


-25-



bulk  transfer.   The district  court  thereafter denied  the



            Health Fund's motion  to enjoin the transfer,  an action from



            which no appeal was taken.



                      We are  thus unable to  find, on this  record, that



            the   bulk  transfer  provided  the  Elmans  with  an  unfair



            advantage,  amounting  to  a fraud,  material  to  the Health



            Fund's  current claim.   Under Alman, fraudulent  intent is a
                                           _____



            necessary element in  order to piece the corporate  veil.  We



            do not think a jury  could properly derive a relevant finding



            of  fraudulent intent material  to the harm  alleged from the



            transfer  by itself.   See  United Elec.,  Radio and  Machine
                                   ___  _________________________________



            Workers,  960  F.2d   at  1094  (approving  "good   faith  if
            _______



            ultimately  unsuccessful  attempt  to  resurrect  a  moribund



            company"); Laborers  Clean-Up Contract  Admin. Trust  Fund v.
                       _______________________________________________



            Uriarte Clean-Up  Serv., Inc.,  736 F.2d  516, 525 (9th  Cir.
            _____________________________



            1984)  (noting  difference  between  a corporation  that  was



            unable  to pay its debts from  the outset and one that simply



            "fell upon bad times").  



                      Besides the fact  of the bulk transfer,  the Health



            Fund points to other factors as a supposed basis for piercing



            Boston Bakers'  veil.  In  its complaint it alleged  that the



            nominal and sole  shareholder, Claire Lank, was  "unaware" of



            her  obligations and rights as a  shareholder and, instead of



            following  her  independent  judgment,  followed the  Elmans'



            instructions.   Also alleged was the Elmans' complete control


-26-



over  Boston Bakers,  even though  they  owned no  stock; the



            Elmans'   disregard   of   corporate   identity;   and    the



            incorporation of Boston Bakers with fraudulent intent.  These



            allegations, however,  to the extent  legally material,  must



            stand  or  fall  on  the  existence in  the  record  of  some



            supporting   evidence.      Moreover,   proof  of   corporate



            informalities, standing  alone, are insufficient.   Plaintiff



            may  not prevail without  some evidence of  fraudulent intent



            material to the harm suffered.  
            _____________________________



                      There  is no evidence  of financial self-dealing in



            the  case of  Boston Bakers  such  as occurred  with Green  &



            Freedman.  None  of the checks introduced by  the Health Fund



            as  payable to  or for  the Elmans  came from  Boston Bakers'



            accounts.



                      In respect to the  claimed "undercapitalization" of



            Boston  Bakers, all the  latter's capital came  from the bulk



            transfer; there was  no unmet agreement by the  Elmans to add



            more, nor  evidence that,  after transfer  to Boston  Bakers,



            they diverted the bulk transfer funds to personal objectives.



            The mere  fact that  Boston Bakers  eventually failed  or had



            less  capital than  needed is  not a  basis for  reaching the



            Elmans personally, absent fraud.



                      Much  is  made  of  the  fact  that  Richard  Elman



            indicated  ignorance as  to how  he was  named  president and


-27-



director of Boston  Bakers3 or whether Boston Bakers  held an



            annual  shareholders'  meeting.    Stanley  Elman  failed  to



            recognize  the firm's  stock  ledger.    And Lank,  the  sole



            shareholder, appears  to have  been a  straw for  the Elmans,



            allegedly so as to make it harder for creditors to reach them



            personally.     None  of  these  items,  however,  singly  or



            together, provide  a sufficient  evidentiary basis  to pierce



            the  corporate  veil.   While  they  may  suggest a  lack  of



            attention  to  corporate  formalities,  they do  not  reflect



            fraudulent intent  material to  the harm alleged,  nor is  it



            clear  how  any  of them,  even  slightly,  disadvantaged the



            plaintiff.



                      There  was also evidence that the Elmans' wives did



            not know  they were directors;  did not participate  in board



            meetings, although corporate  records falsely indicated  they



            did; and  did not  know that Lank  was the  sole stockholder.



            But  these  snippets  do  little  to  demonstrate  more  than



            corporate informality.   Even if the false  corporate records



            concerning the wives'  attendance at directors'  meetings are



            characterized as a  "fraud," there is no  evidence the Health



            Fund knew or  relied on this information to  its detriment or



                                
            ____________________



            3.   Q:   And would you acknowledge, sir, that you don't know

                      by  what authority you  were elected a  director of

                      Boston Bakers?

                 A:   The attorneys set up the corporation.  I don't know

                      the direction.    I  know I  was  an  officer,  the

                      president.


-28-



sustained any injury  whatever as a result.   The "fraudulent



            intent  of  the  individual  defendants" mentioned  in  Alman
                                                                    _____



            requires some meaningful relationship between the  intent and



            the harm visited upon plaintiff.  We add that even the Health



            Fund  itself does  not  argue that  the incorrect  records by



            themselves show fraudulent intent sufficient under Alman.
                                                               _____



                      We  conclude that the district court was correct in



            granting the Elmans'  motion for judgment as a  matter of law



            with  respect to the  Elmans' alleged personal  liability for



            Boston  Bakers' corporate  obligation to  make  good Green  &



            Freedman's delinquent payments to the Health Fund.



            V.        Conclusion
                      __________



                      The  district court's grant of judgment as a matter



            of law is vacated with  respect to Count 3 and affirmed  with
                      vacated                              affirmed
                      _______



            respect to Count 4.  The case is remanded for a new trial and



            other proceedings consistent herewith.


-29-