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6 7 UNITED STATES DISTRICT COURT 8 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 9 10 PUGET SOUND ELECTRICAL CASE NO. 2:20-cv-01675-DGE 11 WORKERS HEALTHCARE TRUST, et al., ORDER DENYING PLAINTIFFS’ 12 MOTION FOR DEFAULT Plaintiffs, JUDGMENT AND GRANTING 13 v. LEAVE TO FILE AN AMENDED COMPLAINT 14 SYNERGY ELECTRICAL CONTRACTING LLC, 15 Defendant. 16 17 I INTRODUCTION 18 Plaintiffs seek enforcement of two prior judgments by requesting a default judgment 19 against Defendant based on an alter-ego theory of liability. The facts giving rise to Plaintiffs’ 20 current alter-ego claim occurred years after the original judgments were obtained and are not 21 otherwise dependent on the prior judgments. Because Plaintiffs fail to identify a proper basis to 22 exercise jurisdiction, this Court lacks jurisdiction to hear Plaintiffs’ alter-ego claim. Accordingly, 23 and for the reasons stated herein, Plaintiffs’ motion for default judgment (Dkt. No. 10) is DENIED. 24 1 II BACKGROUND 2 Plaintiffs are a collection of trust funds known as the Puget Sound Electrical Workers 3 Trust Funds. (Dkt. No. 1 at 1–2.) Plaintiffs previously obtained two ERISA1 based judgments 4 against a company called Shamp Electrical Contracting, Inc. (“Shamp Electrical). (Id. at 4–5.) 5 The first judgment was entered on September 20, 2010. (Id. at 4.) The second judgment was
6 entered on August 24, 2016. (Id. at 5.) Those judgments remain outstanding. (Id.) 7 Plaintiffs allege Synergy Electrical Contracting LLC (“Synergy Electrical”) is “an alter 8 ego/successor entity to Shamp Electrical and was formed, in part, to avoid” the judgments 9 entered against Shamp Electrical. (Id.) Synergy Electrical was formed on October 25, 2018. 10 (Id.) Plaintiffs sole cause of action is for “Alter Ego/Successor Entity Liability” wherein 11 Plaintiffs assert Synergy Electrical is liable for the outstanding judgments, plus any accrued 12 interest. (Id. at 6.) Plaintiffs specifically request judgment be entered against Synergy Electrical 13 for Shamp Electrical’s outstanding judgments. (Id.) 14 At a hearing held on January 28, 2022 to discuss Plaintiffs’ motion for default judgment
15 (Dkt. No. 10), the Court raised whether it had jurisdiction to consider Plaintiffs’ alter-ego claim 16 and asked Plaintiffs to identify authority supporting jurisdiction. 17 III DISCUSSION 18 Ancillary jurisdiction is limited to claims in the same lawsuit that are factually and 19 logically dependent on the primary claim(s) conferring federal jurisdiction. 20 Ancillary jurisdiction may extend to claims having a factual and logical dependence on the primary lawsuit, . . . but that primary lawsuit must contain an independent 21 basis for federal jurisdiction. The court must have jurisdiction over a case or controversy before it may assert jurisdiction over ancillary claims. In a subsequent 22 lawsuit involving claims with no independent basis for jurisdiction, a federal court lacks the threshold jurisdictional power that exists when ancillary claims are 23
1 Employee Retirement Income Security Act of 1974. 24 1 asserted in the same proceeding as the claims conferring federal jurisdiction. Consequently, claims alleged to be factually interdependent with and, hence, 2 ancillary to claims brought in an earlier federal lawsuit will not support federal jurisdiction over a subsequent lawsuit. . . . But once judgment [is] entered in [an] 3 original [law]suit, the ability to resolve simultaneously factually intertwined issues vanish[]. 4 Peacock v. Thomas, 516 U.S. 349, 355 (1996) (emphasis added, citations/quotes omitted). 5 The plaintiff in Peacock filed an ERISA class action lawsuit against an employer and one 6 of its officers. The plaintiff obtained a judgment against the employer, but not against the 7 officer. After unsuccessful attempts at collecting the judgment against the employer, the plaintiff 8 filed a new lawsuit against the officer alleging he engaged in a civil conspiracy with the 9 employer to prevent satisfaction of the prior ERISA judgment. Id. at 351-352. The Supreme 10 Court concluded there was no ancillary jurisdiction over the subsequent lawsuit as it raised no 11 independent basis for conferring jurisdiction: 12 This [subsequent] action is founded not only upon different facts than the ERISA 13 suit, but also upon entirely new theories of liability. In this suit, [plaintiff] alleged civil conspiracy and fraudulent transfer of [the employer’s] assets, but, as we have 14 noted, no substantive ERISA violation. The alleged wrongdoing in this case occurred after the ERISA judgment was entered, and [plaintiff’s] claim—civil 15 conspiracy, fraudulent conveyance, and ‘veil-piercing’—all involved new theories of liability not asserted in the ERISA suit. Other than the existence of the ERISA 16 judgment itself, this suit has little connection to the ERISA case. This is a new action based on theories of relief that did not exist, and could not have existed, at 17 the time the court entered judgment in the ERISA case.
18 Id. at 358-359. As a result, the District Court lacked jurisdiction over the subsequent lawsuit. Id. 19 at 360. 20 As with Peacock, Plaintiffs’ claim in this case is based upon facts distinct from those that 21 supported the entry of the two prior ERISA judgments. In this suit, Plaintiffs allege Synergy 22 Electrical is an alter-ego of Shamp Electrical that it was formed, in part, to avoid the judgments 23 years after the judgments were obtained. This alleged wrongdoing occurred after the ERISA 24 1 judgments were entered, and the present alter-ego claim involves a new theory of liability not 2 asserted in the original ERISA lawsuits. Other than the existence of the prior ERISA judgments 3 themselves, Plaintiffs’ Complaint has little connection to the prior ERISA claims. The 4 Complaint is based on a theory of relief that did not exist, and could not have existed, at the time 5 the prior judgments were obtained. Pursuant to Peacock, this Court lacks jurisdiction over
6 Plaintiffs’ Complaint. 7 The Seventh Circuit recently reached the same conclusion in holding that a district court 8 lacked jurisdiction to hear a successor liability claim filed in a separate lawsuit subsequent to the 9 entry of an ERISA judgment. In E. Cent. Illinois Pipe Trades Health & Welfare Fund v. Prather 10 Plumbing & Heating, Inc., 3 F.4th 954 (7th Cir. 2021), “[t]wo ERISA-covered employee benefit 11 funds filed suit in federal court to hold a newly formed, family-run plumbing company liable for 12 an existing ERISA judgment on the basis that it stepped into the predecessor family company’s 13 obligations.” 3 F.4th at 955. The Seventh Circuit rejected the argument that the federal common 14 law theory of successor liability independently conferred subject matter jurisdiction over the
15 lawsuit. (Id.) (“All agree that the funds seek to impose liability under federal common law. But 16 that alone does not suffice to show a claim ‘arising under’ federal law for purposes of 17 establishing federal question jurisdiction.”) In reaching its holding, the Seventh Circuit stated: 18 The [plaintiffs] do not maintain that [the defendant] has directly violated ERISA, either as an alter ego of Prather Plumbing or in its own right. The only claim the 19 funds raise is for successor liability, with the aim of holding [the defendant] equitably responsible for the unpaid obligation of Prather Plumbing. As there is no 20 federal statutory right of action for successor liability under ERISA, nor a judicially recognized private implied right of action, the funds have failed to demonstrate that 21 this claim arises under federal law.
22 Id. at 963.
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6 7 UNITED STATES DISTRICT COURT 8 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 9 10 PUGET SOUND ELECTRICAL CASE NO. 2:20-cv-01675-DGE 11 WORKERS HEALTHCARE TRUST, et al., ORDER DENYING PLAINTIFFS’ 12 MOTION FOR DEFAULT Plaintiffs, JUDGMENT AND GRANTING 13 v. LEAVE TO FILE AN AMENDED COMPLAINT 14 SYNERGY ELECTRICAL CONTRACTING LLC, 15 Defendant. 16 17 I INTRODUCTION 18 Plaintiffs seek enforcement of two prior judgments by requesting a default judgment 19 against Defendant based on an alter-ego theory of liability. The facts giving rise to Plaintiffs’ 20 current alter-ego claim occurred years after the original judgments were obtained and are not 21 otherwise dependent on the prior judgments. Because Plaintiffs fail to identify a proper basis to 22 exercise jurisdiction, this Court lacks jurisdiction to hear Plaintiffs’ alter-ego claim. Accordingly, 23 and for the reasons stated herein, Plaintiffs’ motion for default judgment (Dkt. No. 10) is DENIED. 24 1 II BACKGROUND 2 Plaintiffs are a collection of trust funds known as the Puget Sound Electrical Workers 3 Trust Funds. (Dkt. No. 1 at 1–2.) Plaintiffs previously obtained two ERISA1 based judgments 4 against a company called Shamp Electrical Contracting, Inc. (“Shamp Electrical). (Id. at 4–5.) 5 The first judgment was entered on September 20, 2010. (Id. at 4.) The second judgment was
6 entered on August 24, 2016. (Id. at 5.) Those judgments remain outstanding. (Id.) 7 Plaintiffs allege Synergy Electrical Contracting LLC (“Synergy Electrical”) is “an alter 8 ego/successor entity to Shamp Electrical and was formed, in part, to avoid” the judgments 9 entered against Shamp Electrical. (Id.) Synergy Electrical was formed on October 25, 2018. 10 (Id.) Plaintiffs sole cause of action is for “Alter Ego/Successor Entity Liability” wherein 11 Plaintiffs assert Synergy Electrical is liable for the outstanding judgments, plus any accrued 12 interest. (Id. at 6.) Plaintiffs specifically request judgment be entered against Synergy Electrical 13 for Shamp Electrical’s outstanding judgments. (Id.) 14 At a hearing held on January 28, 2022 to discuss Plaintiffs’ motion for default judgment
15 (Dkt. No. 10), the Court raised whether it had jurisdiction to consider Plaintiffs’ alter-ego claim 16 and asked Plaintiffs to identify authority supporting jurisdiction. 17 III DISCUSSION 18 Ancillary jurisdiction is limited to claims in the same lawsuit that are factually and 19 logically dependent on the primary claim(s) conferring federal jurisdiction. 20 Ancillary jurisdiction may extend to claims having a factual and logical dependence on the primary lawsuit, . . . but that primary lawsuit must contain an independent 21 basis for federal jurisdiction. The court must have jurisdiction over a case or controversy before it may assert jurisdiction over ancillary claims. In a subsequent 22 lawsuit involving claims with no independent basis for jurisdiction, a federal court lacks the threshold jurisdictional power that exists when ancillary claims are 23
1 Employee Retirement Income Security Act of 1974. 24 1 asserted in the same proceeding as the claims conferring federal jurisdiction. Consequently, claims alleged to be factually interdependent with and, hence, 2 ancillary to claims brought in an earlier federal lawsuit will not support federal jurisdiction over a subsequent lawsuit. . . . But once judgment [is] entered in [an] 3 original [law]suit, the ability to resolve simultaneously factually intertwined issues vanish[]. 4 Peacock v. Thomas, 516 U.S. 349, 355 (1996) (emphasis added, citations/quotes omitted). 5 The plaintiff in Peacock filed an ERISA class action lawsuit against an employer and one 6 of its officers. The plaintiff obtained a judgment against the employer, but not against the 7 officer. After unsuccessful attempts at collecting the judgment against the employer, the plaintiff 8 filed a new lawsuit against the officer alleging he engaged in a civil conspiracy with the 9 employer to prevent satisfaction of the prior ERISA judgment. Id. at 351-352. The Supreme 10 Court concluded there was no ancillary jurisdiction over the subsequent lawsuit as it raised no 11 independent basis for conferring jurisdiction: 12 This [subsequent] action is founded not only upon different facts than the ERISA 13 suit, but also upon entirely new theories of liability. In this suit, [plaintiff] alleged civil conspiracy and fraudulent transfer of [the employer’s] assets, but, as we have 14 noted, no substantive ERISA violation. The alleged wrongdoing in this case occurred after the ERISA judgment was entered, and [plaintiff’s] claim—civil 15 conspiracy, fraudulent conveyance, and ‘veil-piercing’—all involved new theories of liability not asserted in the ERISA suit. Other than the existence of the ERISA 16 judgment itself, this suit has little connection to the ERISA case. This is a new action based on theories of relief that did not exist, and could not have existed, at 17 the time the court entered judgment in the ERISA case.
18 Id. at 358-359. As a result, the District Court lacked jurisdiction over the subsequent lawsuit. Id. 19 at 360. 20 As with Peacock, Plaintiffs’ claim in this case is based upon facts distinct from those that 21 supported the entry of the two prior ERISA judgments. In this suit, Plaintiffs allege Synergy 22 Electrical is an alter-ego of Shamp Electrical that it was formed, in part, to avoid the judgments 23 years after the judgments were obtained. This alleged wrongdoing occurred after the ERISA 24 1 judgments were entered, and the present alter-ego claim involves a new theory of liability not 2 asserted in the original ERISA lawsuits. Other than the existence of the prior ERISA judgments 3 themselves, Plaintiffs’ Complaint has little connection to the prior ERISA claims. The 4 Complaint is based on a theory of relief that did not exist, and could not have existed, at the time 5 the prior judgments were obtained. Pursuant to Peacock, this Court lacks jurisdiction over
6 Plaintiffs’ Complaint. 7 The Seventh Circuit recently reached the same conclusion in holding that a district court 8 lacked jurisdiction to hear a successor liability claim filed in a separate lawsuit subsequent to the 9 entry of an ERISA judgment. In E. Cent. Illinois Pipe Trades Health & Welfare Fund v. Prather 10 Plumbing & Heating, Inc., 3 F.4th 954 (7th Cir. 2021), “[t]wo ERISA-covered employee benefit 11 funds filed suit in federal court to hold a newly formed, family-run plumbing company liable for 12 an existing ERISA judgment on the basis that it stepped into the predecessor family company’s 13 obligations.” 3 F.4th at 955. The Seventh Circuit rejected the argument that the federal common 14 law theory of successor liability independently conferred subject matter jurisdiction over the
15 lawsuit. (Id.) (“All agree that the funds seek to impose liability under federal common law. But 16 that alone does not suffice to show a claim ‘arising under’ federal law for purposes of 17 establishing federal question jurisdiction.”) In reaching its holding, the Seventh Circuit stated: 18 The [plaintiffs] do not maintain that [the defendant] has directly violated ERISA, either as an alter ego of Prather Plumbing or in its own right. The only claim the 19 funds raise is for successor liability, with the aim of holding [the defendant] equitably responsible for the unpaid obligation of Prather Plumbing. As there is no 20 federal statutory right of action for successor liability under ERISA, nor a judicially recognized private implied right of action, the funds have failed to demonstrate that 21 this claim arises under federal law.
22 Id. at 963. 23 24 1 As in Prather Plumbing, Plaintiffs in this case only claim an alter-ego theory of liability, 2 with the aim of holding Synergy Electric responsible for Shamp Electrical’s unpaid obligations. 3 Plaintiffs, therefore, have failed to demonstrate that the standalone alter-ego claim arises under 4 federal law. 5 Notwithstanding, Plaintiffs assert “[t]he Ninth Circuit has long recognized alter-ego
6 claims as arising under ERISA” by citing to UA Loc. 343 United Ass’n of Journeyman & 7 Apprentices of Plumbing & Pipefitting Indus. of U.S. and Canada, AFL-CIO, et al v. Nor-Cal 8 Plumbing, Inc., 48 F.3d 1465 (9th Cir. 1994). (Dkt. No. 16 at 3.) However, the alter-ego claim 9 asserted in Nor-Cal was in conjunction with the underlying ERISA claim filed against the 10 original employer, which formed the basis for federal jurisdiction and provided ancillary 11 jurisdiction over the alter-ego theory of liability. 48 F.3d at 1471 (“Because the case at bar 12 concerns contractual obligations [against the original employer and the alter-ego], namely the 13 employer’s obligation to contribute during the agreement’s term, jurisdiction under ERISA was 14 also proper.”) Thus, Nor-Cal does not conflict with Peacock.2
15 Plaintiffs also reference Trustees of the Constr. Indus. and Laborers Health & Welfare 16 Tr. v. Pro-Cut LLC, No. 21CV00205GMNVCF, 2016 WL 1688001 (D. Nev. Apr. 26, 2016) and 17 Bd. of Trustees, Sheet Metal Workers’ Nat. Pension Fund v. Elite Erectors, Inc., 212 F.3d 1031 18 (7th Cir. 2000) for the proposition that there exists a potential split on whether an alter-ego 19
2 Plaintiffs also reference Thomas, Head & Greisen Emps. Tr. v. Buster, 95 F.3d 1449 (9th Cir. 20 1996). Buster, however, involved supplemental proceedings in which the judgment creditor sought to void the judgment debtor’s fraudulent property transfers to related third parties. The 21 third parties were joined in the supplemental proceedings and a judgment eventually was entered against them. 95 F.3d at 1451. The Ninth Circuit held “the district court properly exercised 22 ancillary jurisdiction over [the parties] in [plaintiff’s] supplementary proceeding to set aside the alleged fraudulent conveyances.” Id. at 1455. Buster did not involve a standalone alter-ego 23 claim filed in a subsequent lawsuit. Rather, it involved supplemental proceedings aimed at voiding fraudulent conduct. 24 1 theory provides independent jurisdiction. (Dkt. No. 16 at 4.) However, Pro-Cut LLC aptly 2 noted: 3 the Elite Erectors line of cases relied upon by [plaintiffs] are similarly inapposite. In Elite Erectors, no preexisting judgment against the ERISA employers existed. 4 Elite Erectors, 212 F.3d at 1033. Instead, the Elite Erectors plaintiffs brought a single lawsuit against the original ERISA employers and their alter egos. As 5 the Seventh Circuit noted, such facts are distinguishable from the facts here, where the instant lawsuit is simply an attempt to collect on a judgment obtained in a 6 separate lawsuit. See id. at 1037[.]
7 2016 WL 1688001, *3 (emphasis added). 8 Contrary to Plaintiffs’ assertions, the First, Second and Tenth Circuit also are in accord. 9 See Futura Dev. of Puerto Rico, Inc. v. Estado Libre Asociado de Puerto Rico, 144 F.3d 7, 11 10 (1st Cir. 1998) (“Peacock holds that enforcement jurisdiction does not exist in a subsequent 11 lawsuit to impose an obligation to pay an existing federal judgment on a new defendant 12 whenever the new proceeding lacks factual dependence upon the old proceeding. Obviously, 13 subsequent proceedings based upon defendant’s actions occurring after the original proceeding 14 will necessarily be factually independent from the primary proceeding.”); Epperson v. Ent. 15 Express, Inc., 242 F.3d 100, 107 (2d Cir. 2001) (“[I]n this Circuit . . . a distinction for 16 jurisdictional purposes exists between an action to collect a judgment . . . and an action to 17 establish liability on the part of a third party[ ]. The former does not require an independent 18 jurisdictional basis and may proceed even if the parties are non-diverse. The latter must have its 19 own source of federal jurisdiction, so that absent an independent basis for federal jurisdiction a 20 new defendant may not be haled into federal court.”); Ellis v. All Steel Const., Inc., 389 F.3d 21 1031, 1034 (10th Cir. 2004) (“Peacock also is not implicated in actions to reach and collect 22 assets of the judgment debtor held by a third party; it is only when the plaintiff seeks to hold the 23 third party personally liable on the judgment that an independent basis is required.”). 24 1 In summary, Peacock is controlling. Plaintiffs assert only an alter-ego claim that is 2 factually independent from the two prior judgments and which is based on facts that occurred 3 after the judgments were entered. As such, the Court lacks jurisdiction over Plaintiffs’ alter-ego 4 claim. 5 IV CONCLUSION
6 Accordingly, and having considered Plaintiffs’ motion for default judgment, the briefing, 7 and the remainder of the record, the Court finds and ORDERS that Plaintiffs’ motion for default 8 judgment (Dkt. No. 10) is DENIED. The Complaint is DISMISSED without prejudice and 9 Plaintiffs are granted leave to file an amended complaint no later than July 11, 2022 should they 10 believe there exists a cause of action over Defendant that confers this Court with jurisdiction. 11 Dated this 24th day of June 2022. 12 13 A David G. Estudillo 14 United States District Judge 15
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