Massachusetts v. Belmont

• Court: Court of Appeals for the First Circuit
• Decided: March 27, 1998
• Docket: 97-2285
• Status: Published

Opinion

USCA1 Opinion

      

                    United States Court of Appeals

                        For the First Circuit

                       ____________________

                                   

    No.  97-2285

    

                     MASSACHUSETTS CARPENTERS

                   CENTRAL COLLECTION AGENCY,

                                   

                       Plaintiff, Appellee,

                                  

                                  v.

    

                 BELMONT CONCRETE CORPORATION AND

                ALGAR CONSTRUCTION CORPORATION,

                                   

                     Defendants, Appellants.

                                  

                         ____________________


APPEAL FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF MASSACHUSETTS

                                

        [Hon. Douglas P. Woodlock, U.S. District Judge]

                                  

                         ____________________

    

                                Before

                                   

                        Lynch, Circuit Judge,

    

               Coffin and Bownes, Senior Circuit Judges.

                                

                                   ____________________

    

        George A. Fairbanks, III, with whom Fairbanks & Koczera,John F. Creedon, and Creedon & Murphy were on brief, for

    appellants.

    

        Aaron D. Krakow, with whom Krakow & Souris was on brief,

    for appellee.

    

                       ____________________

                                

                         March 27, 1998

                                   ____________________


LYNCH, Circuit Judge.  Within a year of signing a

    collective bargaining agreement with the Massachusetts

    Carpenters Union, the Belmont Concrete Corporation went out of

    business.  Under that agreement, Belmont was obligated to pay

    into Union employee benefit funds for the benefit of its

  workers.    Another concrete company, Algar Construction

    Corporation (owned and managed from the same location by

    members of the same families as Belmont) employed many of

    Belmont's employees, used some of Belmont's equipment, and

    worked on contracts for the same company with which Belmont had

    worked.  When Belmont stopped making the payments it was

    obligated to make to the fund, the Massachusetts Carpenters

    Central Collection Agency (MCCCA) sued, alleging violations of

    Section 515 of the Employee Retirement Income Security Act

    ("ERISA"), 29 U.S.C.  1145.  It sued Belmont on the agreement

    and Algar on the theory that Algar was an alter ego of Belmont,

    and so liable for its obligations to the benefit funds.  The

    defendants protested that the person who signed the agreement

    for Belmont had no authority to do so, that there was never an

    enforceable agreement, and that Algar, which had never signed

    the agreement, could not be liable for Belmont's debts.

       On summary judgment, the district court ruled for the

  plaintiff in a carefully reasoned opinion.    It ordered

    Belmont, now defunct and assetless, and Algar to pay MCCCA

    $121,339.97 in unpaid contributions and penalties.  We affirm

    largely on the basis of the district court opinion, and further

    discuss the alter ego issue.  We do so because this issue

    frequently arises in suits to hold one company liable for

    benefit plan contributions another company has contracted to

    make under the Multiemployer Pension Plan Amendments Act of

    1980 (MPPAA), Pub. L. 96-364, 94 Stat. 1208 (1980), which

  amends ERISA, 29 U.S.C.  1001-1461.    We also do so to

    emphasize that the alter ego jurisprudence developed in cases

    brought under the National Labor Relations Act, 29 U.S.C. 

    141-197, is applicable in cases brought under ERISA where the

    basis for imposition of liability is also the alter ego

    doctrine.

                               I

                                     As summary judgment has been granted, we review the

    facts in the light most favorable to the defendants and will

    draw all reasonable inferences in their favor.  See Champagnev. Servistar Corp., 1998 WL 99687 *1 (1st Cir. Mar. 12, 1998). 

    The district court's opinion thoroughly recounts the facts of

    the case, and we focus on the facts relevant to the alter ego

    issue.

    A.  The Companies

       Belmont and Algar both perform concrete work in the

    construction industry in Massachusetts.  Algar was formed in

    1990 and remains active today.  Belmont was formed in 1992 and

    was active until the end of 1993.  Each company had its

    principal place of business at 37 Belmont Street in Brockton,

    Massachusetts.  Belmont occupied offices on the fourth floor;

    Algar occupied offices in the basement.

       Belmont and Algar are family businesses owned and

    operated by members of the Bota, Diaz, and Guerreiro families. 

    Belmont was formally owned by Lionel Diaz ("Diaz") and Anita

    Bota (Diaz' wife's cousin).  Although an "owner," Anita Bota

    only performed occasional secretarial work for Belmont; Belmont

    was actually controlled by Diaz, Victor Guerreiro

    ("Guerreiro"), and Horacio Bota ("Bota"), Anita Bota's father. 

    These men negotiated the contracts, supervised the construction

    sites, and generally managed the business.  Algar was formally

    owned by Margaret Bota (Bota's daughter) and Sarita Diaz (Diaz'

    wife, Guerreiro's daughter and Bota's niece).  Like Anita Bota,

    the two "owners" performed primarily secretarial work, and

    Algar was actually controlled by Bota, Guerreiro and Diaz.

       Although Bota, Diaz, and Guerreiro took the position

    that they did no work for Algar until all Belmont work had been

    completed, specific facts from their own depositions establish

    some overlap in responsibilities.  Guerreiro stated in his

    deposition that he was involved in the preparation of bids and

    negotiation of contracts for Algar in 1993.  Bota stated that

    he signed a contract for construction work on behalf of Algar

    in 1993.  And Diaz acknowledged that his stamp was used to sign

    a contract with Middlesex Construction Corporation on behalf of

    Algar in 1993.

       Belmont and Algar were intertwined in other ways. 

    They shared employees.  Maurice Law and Paul Merhey acted as

    supervisors and estimators for Belmont, and then for Algar

    after Belmont ceased conducting business.  Other Algar

    employees who previously worked for Belmont included Mario

    Rosa, Antonio Gomes, Joao DaSilva, George Raposa, Jeff Bassett,

    Paulo Costa, Manual Pina, and Joao Viveiros.  Belmont and Algar

    also shared business.  Belmont was a subcontractor for

    Middlesex Construction for two of the five construction

    projects it performed after April 1, 1993 (until it ceased

    conducting business near the end of 1993); Algar was a

    subcontractor for Middlesex Construction for eight of the

    twelve projects it performed after April 1, 1993.  Belmont also

    made use of Algar's trucks and equipment through an informal

    "leasing" arrangement for which there is no documentation.

       Finally, there is also evidence that employees were

    working on both Algar and Belmont projects at the same time. 

    On May 1, 1993, a Union representative saw Algar employees

    leave a job at a West Springfield site and travel to a worksite

    where there was a truck belonging to Belmont.  The construction

    supervisor at the second site informed the Union representative

    that he worked for Belmont and that Belmont was the contractor

    at that location. 

    B.  The Agreement

       On April 23, 1993, Bota, on Belmont's behalf, signed

    the State-Wide Agreement ("Agreement") with the Carpenters

    Union.  The Agreement binds each signatory contractor to the

    terms and conditions of the collective bargaining agreements of

  the various Massachusetts Carpenters Local Unions,   which in

    turn require that the contractor make employee contributions to

    the MCCCA for each hour of carpentry work performed by its

  employees.    In addition, the collective bargaining agreements

    incorporate by reference the trust agreements of the Carpenters

    Union affiliated employee benefit funds.

       After signing, Belmont complied in part with its

    obligations under the Agreement to make employee benefit

    contributions to the MCCCA.  Belmont's carpenters performed

    3,925 hours of work between April 1993 and November 1993. 

    Belmont made contributions to the MCCCA for 2,144 hours of that

    work.   

       Algar never signed the Agreement.  Between April 23,

    1993, and September 1996, Algar's carpenters performed

    approximately 8,070 hours of carpentry work.  Algar made no

    contributions to MCCCA for this work.

       On March 9, 1995, MCCCA filed this action against

    Belmont and Algar, alleging violations of Section 515 of ERISA,

  29 U.S.C.  1145.    MCCCA sought $3,271.37 in unpaid

    contributions from Belmont and $69,351.97 in unpaid

    contributions from Algar.  MCCCA argued that Belmont was a

    signatory to the Agreement and bound by its terms, and that

    nonsignatory Algar was also bound by the Agreement by virtue of

    being Belmont's alter ego.  Defendants responded that Bota did

    not have authority to sign the Agreement on Belmont's behalf,

    and that, regardless, Algar was not Belmont's alter ego.  The

    district court granted summary judgment in MCCCA's favor,

    granting MCCCA the full amount of damages sought plus penalties

    as defined in the governing collective bargaining agreement --

    a total of $121,339.97.  Defendants appeal.

                                II

                                     The alter ego doctrine 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.'"  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 n.5 (1974)).  Although the alter

    ego doctrine is primarily applied in situations involving

    successor companies, "where the successor is merely a disguised

    continuance of the old employer," C.E.K. Indus. Mechanical

    Contractors, Inc. v. NLRB, 921 F.2d 350, 354 (1st Cir. 1990)

    (citing Southport Petroleum Co. v. NLRB, 315 U.S. 100, 106

    (1992)), it also applies to situations where the companies are

    parallel companies.  See Union Builders, Inc. v. NLRB, 68 F.3d

    520, 524 (1st Cir. 1995).  In this case, Algar was both

    parallel to Belmont and successive to Belmont.  A finding that

    two employers are alter egos will bind the nonsignatory to a

    collective bargaining agreement between the union and the

    nonsignatory's alter ego.  See Hospital San Rafael, 42 F.3d at

    52-53; Penntech Papers, Inc. v. NLRB, 706 F.2d 18, 24 (1st Cir.

    1983).  

       Although developed in the labor law context, alter

    ego or successor liability analysis has been applied to claims

    involving employee benefit funds brought under ERISA and the

    LMRA.  See Langone v. C. Walsh, Inc., 864 F. Supp. 233 (D.

    Mass. 1994), aff'd, 1996 WL 672277 (1st Cir. Nov. 20, 1996);

    Upholsterers' Int'l Union Pension Fund v. Artistic Furniture of

    Pontiac, 920 F.2d 1323 (7th Cir. 1990); Central States,

    Southeast and Southwest Areas Pension Fund v. Sloan, 902 F.2d

    593 (7th Cir. 1990); United Steelworkers v. Connors Steel Co.,

    847 F.2d 707 (11th Cir. 1988); Hawaii Carpenters Trust Funds v.

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

    rationale is that "an employer who evades his pension

    responsibilities gains an unearned advantage in his labor

    activities.  Moreover, underlying congressional policy behind

    ERISA clearly favors the disregard of the corporate entity in

    cases where employees are denied their pension benefits." 

    Chicago Dist. Council of Carpenters Pension Fund v. P.M.Q.T.,

    Inc., 169 F.R.D. 336, 342 (N.D. Ill. 1996) (citations and

    internal quotation marks omitted).

       In determining whether a nonsignatory employer is an

    alter ego of a signatory, we consider a variety of factors,

    including continuity of ownership, similarity of the two

    companies in relation to management, business purpose,

    operation, equipment, customers, supervision, and anti-union

    animus   i.e., "whether the alleged alter ego entity was

    created and maintained in order to avoid labor obligations." 

    Hospital San Rafael, 42 F.3d at 50; see C.E.K., 921 F.2d at

    354.  No single factor is controlling, and all need not be

    present to support a finding of alter ego status.  See Hospital

    San Rafael, 42 F.3d at 51.  In particular, there is no rule

    that wrongful motive is an essential element of a finding of

    alter ego status.  See id.

      The defendants here argue that the rule of Hospital

  San Rafael is incorrect, and that wrongful motive is a sine qua

  non for finding alter ego status in an ERISA case.  On this

  point, they say, there are material facts in dispute. 

  Defendants rely on United Elec., Radio & Mach. Workers v. 163

  Pleasant St. Corp., 960 F.2d 1080 (1st Cir. 1992), for this

  legal proposition.  Although 163 Pleasant St. bears some

  similarity to the present case (the cause of action was based

  on ERISA and the LMRA and the plaintiffs sought back-payments

  to a health care fund), we think it is inapposite here. 

  Fundamentally, 163 Pleasant St. is a case about personal

  jurisdiction:  whether there was personal jurisdiction in

  Massachusetts over a foreign parent corporation based on the

  activities of a Massachusetts subsidiary.  The court held that

  personal jurisdiction cannot be exercised over a foreign

  company through a corporate veil-piercing theory absent a

  showing of fraud.  This holding is not based on ERISA and the

  LMRA.  In addition, we think the policies generally served by

  various corporate veil-piercing approaches, see Birbara v.

  Locke, 99 F.3d 1233 (1st Cir. 1996), address different

 interests than does the alter ego doctrine.   We disapprove of

  the direct application of those veil-piercing rules for

  jurisdictional purposes to the very different problem we face

 here. 

      Rather, we think that the Hospital San Rafael case

  provides the better and more apt model.  It is consonant with

  the alter ego jurisprudence developed in the labor law context

  and more fully serves the policies that underlie the MPPAA and

  ERISA.  It is true that Hospital San Rafael and the present

  case arise in different contexts:  Hospital San Rafael involved

  the NLRB's application for enforcement of its order to a

  successor hospital to bargain with a union that had been

  recognized at a predecessor hospital, based on the NLRB's

  determination that the successor and predecessor hospitals were

  alter egos.  This case involves a direct action against the

  employer by the collection agency for a union-sponsored

  employee benefit fund.  We think this is a distinction without

  a difference, at least for present purposes, as the fundamental

  alter ego analysis animating both situations is the same.

                               III

                                    Applying the alter ego test, we conclude that Algar

  is Belmont's alter ego, and therefore liable under the

  Agreement.  First, there is continuity of ownership.  SeeHospital San Rafael, 42 F.3d at 51.  Continuity of ownership

  has been found to exist when the nonsignatory and signatory

  companies are owned by members of the same family.  See Sloan,

  902 F.2d at 597; J.M. Tanaka Constr., Inc. v. NLRB, 675 F.2d

  1029, 1034-35 (9th Cir. 1982).  This would be especially

  telling when the named owners of the nonsignatory have little

  responsibility or control over the management of the company,

  and do not have a financial investment in the company.  Here,

  both Belmont and Algar were formally owned by members of the

  Diaz, Bota, and Guerreiro families, and the companies were in

  fact owned, operated and managed by the same three men. 

  Significantly, the three women who "owned" Belmont and Algar

  were owners in name only:  they had no financial investment in

  the company, and performed primarily secretarial work within

 the office.   The evidence suggests that Sarita Diaz and

  Margaret Bota were named as owners of Algar so that Algar might

  obtain certification as a Women Business Enterprise:  after

  certification was denied, Sarita Diaz and Margaret Bota

  transferred ownership to Guerreiro and Bota without receiving

  financial consideration in return.

      As to the other prongs of the alter ego test, it is 

  undisputed that Belmont was and Algar is in the construction

  business performing concrete work in Massachusetts.  It is

  undisputed that their offices are in the same building,

  although on different floors.  It is undisputed that the

  companies are managed and supervised by the same three people: 

  Diaz, Bota, and Guerreiro.  It is also clear that the two

  companies shared a large number of employees, that a

  substantial portion of each company's work was for the same

  client, and that the companies shared equipment through

  informal leasing arrangements.

      The district court did not reach a decision on

  whether there was anti-union animus, other than to say that the

  evidence was suggestive of its existence.  A finding of anti-

  union animus is not essential to sustain a finding that Belmont

  and Algar are alter egos.  See Hospital San Rafael, 42 F.3d at

  51.  The other evidence is sufficient to support the conclusion

  that a reasonable finder of fact would have to conclude that

  Algar is Belmont's alter ego.

      Regarding damages, we have carefully reviewed the

  district court's determination of damages and are satisfied

  that it was correct.  As the district court aptly points out,

  there is no credible evidence to support the defendants'

  argument that certain work was "grandfathered" into the

  Agreement and therefore not subject to its requirements; such

  an understanding is certainly not present in the language of

  the Agreement.

      The decision of the district court is affirmed. 

  Costs are awarded to MCCCA.