1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 RESILIENT FLOOR COVERING Case No. 18-cv-04480-WHO PENSION FUND, et al., 8 Plaintiffs, ORDER DENYING PLAINTIFFS' 9 MOTION FOR SUMMARY v. JUDGMENT 10 THREE RIVERS FLOORING, INC., et al., 11 Defendants. 12 Plaintiffs Resilient Floor Covering Pension Fund (“the Fund”) and the Board of Trustees of 13 the Resilient Floor Covering Trust Fund move for summary judgment against Quality Contracting 14 Services, Inc. (“Quality”) and Three Rivers Flooring, Inc. (“Three Rivers”), arguing that 15 defendants are subject to withdrawal liability pursuant to the Multiemployer Pension Plan 16 Amendments Act (“MPPAA”), 29 U.S.C. § 1381 et seq. At issue is whether Three Rivers was a 17 successor to Quality that took over with notice of the potential liability of Quality’s withdrawal 18 from the Fund, and whether Three Rivers and Quality are liable as alter-egos. I find that there are 19 disputed material issues of fact regarding whether Three Rivers took over all or substantially all of 20 Quality’s customer base, and whether Three Rivers and Quality were commonly owned and 21 managed. Accordingly, plaintiffs’ motion is DENIED. 22 BACKGROUND 23 Plaintiffs brought this case on July 24, 2018, claiming that Three Rivers and Quality are 24 subject to withdrawal liability as alter egos, and that Three Rivers is subject to liability as a 25 successor employer pursuant to the MPPAA. Dkt. No. 1. Quality failed to appear and the clerk 26 granted a default against it on November 7, 2018. Dkt. No. 21. However, I denied plaintiffs’ 27 motion for default judgment on April 4, 2019 because a default judgment against Quality would 1 necessarily bind Three Rivers and preclude it from disputing the amount of withdrawal liability 2 that it may owe. Dkt. No. 33. On December 4, 2019, plaintiffs filed a motion for summary 3 judgment on both claims. Three Rivers filed an opposition on December 18 and plaintiffs replied 4 on December 24.1 5 LEGAL STANDARD 6 Summary judgment on a claim or defense is appropriate “if the movant shows that there is 7 no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of 8 law.” Fed. R. Civ. P. 56(a). In order to prevail, a party moving for summary judgment must show 9 the absence of a genuine issue of material fact with respect to an essential element of the non- 10 moving party’s claim, or to a defense on which the non-moving party will bear the burden of 11 persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has 12 made this showing, the burden then shifts to the party opposing summary judgment to identify 13 “specific facts showing there is a genuine issue for trial.” Id. 324. The party opposing summary 14 judgment must then present affirmative evidence from which a jury could return a verdict in that 15 party’s favor. Anderson v. Liberty Lobby, 477 U.S. 242, 257 (1986). On summary judgment, the 16 Court draws all reasonable factual inferences in favor of the non-movant. Id. at 255. “Credibility 17 determinations, the weighing of the evidence, and the drawing of legitimate inferences from the 18 facts are jury functions, not those of a judge.” Id. (citation omitted). “The mere existence of a 19 scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be 20 evidence on which the jury could reasonably find for the plaintiff.” Id. at 242. 21 DISCUSSION 22 After hearing the arguments of the parties, I find that there are material facts in dispute 23 with respect to both of plaintiffs’ causes of action. This matter will proceed to trial. 24 The cornerstone of the inquiry into whether Three Rivers is liable as a successor to Quality 25 for the purposes of the MPPAA is whether Three Rivers took over the bulk Quality’s customer 26 base. Resilient Floor Covering Pension Tr. Fund Bd. of Trustees v. Michael’s Floor Covering, 27 1 Inc., 801 F.3d 1079, 1095-96 (9th Cir. 2015). The evidence here is disputed and unclear. The 2 parties do not dispute that the Collective Bargaining Agreement (“CBA”) that Quality entered into 3 prohibited it from working with non-union subcontractors. Nor do they dispute that all of Three 4 Rivers’s brokers were also brokers for Quality (or had purchased the assets of a broker for 5 Quality). They do dispute whether Three Rivers serviced non-union customers that Quality was 6 not able to service due to the CBA, thus making it impossible for Three Rivers to “take[] over the 7 economically critical bulk of [Quality’s] customer base.” Id. at 1084. 8 Three Rivers asserts that “Quality was purportedly no longer allowed to work with non- 9 union brokers such as Sherman Loehr and A&P, etc.” Dkt. No. 50 at 24. Rodriguez, Three 10 Rivers’s founder, stated that “[u]pon information and belief, on or about July 2014, Plaintiff no 11 longer permitted Quality nor any other companies in Plaintiff’s union to work with non-union 12 brokers,” Dkt. No. 50-1 ¶ 19, and Paiva (who ran Quality) stated that “[o]n or about 2014, Sam 13 Trejio and Vincent Echeverria, from the local union DC16 informed me that the new collective 14 bargaining agreement would no longer allow companies like Quality to work with non-union 15 brokers as Quality had been.” Dkt. No. 50-3 ¶ 27. During oral argument, defendants made a 16 slightly different argument, contending that Three Rivers’s customer base was different from 17 Quality’s because the brokers, who are able to work with multiple contractors and are not strictly 18 union or non-union, serviced different end-customers for both “union jobs” and “non-union jobs.” 19 They stated that Three Rivers’s business model was to service end-customers that would not 20 employ union contractors like Quality, and pointed out that between 2010 and 2014, both 21 companies were not only in operation but also grew at the same time. 22 Plaintiffs contend that Three Rivers and Quality shared a customer base because both 23 companies employed the same brokers. According to plaintiffs, the end-customers are irrelevant 24 because they do not pay Three Rivers and Quality. Michael’s Floor Covering does not directly 25 define “customer,” but suggests that customers are those that contribute to a company’s revenue. 26 801 F.3d at 1097 (discussing utility of “a measure of the billings on the jobs worked for 27 continuing customers by the old and new companies [], as pension fund contributions are usually 1 the relevant “customer base” includes the brokers or just the end-customers. There is both a 2 factual and perhaps a legal question as to what impact, if any, the end-customer jobs have on the 3 analysis of “customer base” as contemplated by Michael’s Floor Covering. 4 Adding support to defendants’ position, they assert that (i) Quality stopped being able to 5 work with its brokers (e.g., Dynamic Commercial Flooring, A&P Floor Company, Sherman- 6 Loehr, and Capital Commercial Flooring) in 2014 because they decided to go “non-union”; (ii) the 7 brokers are hired by end-customers for union and non-union jobs such that the brokers could hire 8 Three Rivers for jobs that Quality could not perform; and (iii) Three Rivers’s business model was 9 to service the customers that Quality could not due to the requirements of the brokers or their end- 10 customers and Quality’s obligations under the CBA. Plaintiffs’ evidence did not address this.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 RESILIENT FLOOR COVERING Case No. 18-cv-04480-WHO PENSION FUND, et al., 8 Plaintiffs, ORDER DENYING PLAINTIFFS' 9 MOTION FOR SUMMARY v. JUDGMENT 10 THREE RIVERS FLOORING, INC., et al., 11 Defendants. 12 Plaintiffs Resilient Floor Covering Pension Fund (“the Fund”) and the Board of Trustees of 13 the Resilient Floor Covering Trust Fund move for summary judgment against Quality Contracting 14 Services, Inc. (“Quality”) and Three Rivers Flooring, Inc. (“Three Rivers”), arguing that 15 defendants are subject to withdrawal liability pursuant to the Multiemployer Pension Plan 16 Amendments Act (“MPPAA”), 29 U.S.C. § 1381 et seq. At issue is whether Three Rivers was a 17 successor to Quality that took over with notice of the potential liability of Quality’s withdrawal 18 from the Fund, and whether Three Rivers and Quality are liable as alter-egos. I find that there are 19 disputed material issues of fact regarding whether Three Rivers took over all or substantially all of 20 Quality’s customer base, and whether Three Rivers and Quality were commonly owned and 21 managed. Accordingly, plaintiffs’ motion is DENIED. 22 BACKGROUND 23 Plaintiffs brought this case on July 24, 2018, claiming that Three Rivers and Quality are 24 subject to withdrawal liability as alter egos, and that Three Rivers is subject to liability as a 25 successor employer pursuant to the MPPAA. Dkt. No. 1. Quality failed to appear and the clerk 26 granted a default against it on November 7, 2018. Dkt. No. 21. However, I denied plaintiffs’ 27 motion for default judgment on April 4, 2019 because a default judgment against Quality would 1 necessarily bind Three Rivers and preclude it from disputing the amount of withdrawal liability 2 that it may owe. Dkt. No. 33. On December 4, 2019, plaintiffs filed a motion for summary 3 judgment on both claims. Three Rivers filed an opposition on December 18 and plaintiffs replied 4 on December 24.1 5 LEGAL STANDARD 6 Summary judgment on a claim or defense is appropriate “if the movant shows that there is 7 no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of 8 law.” Fed. R. Civ. P. 56(a). In order to prevail, a party moving for summary judgment must show 9 the absence of a genuine issue of material fact with respect to an essential element of the non- 10 moving party’s claim, or to a defense on which the non-moving party will bear the burden of 11 persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has 12 made this showing, the burden then shifts to the party opposing summary judgment to identify 13 “specific facts showing there is a genuine issue for trial.” Id. 324. The party opposing summary 14 judgment must then present affirmative evidence from which a jury could return a verdict in that 15 party’s favor. Anderson v. Liberty Lobby, 477 U.S. 242, 257 (1986). On summary judgment, the 16 Court draws all reasonable factual inferences in favor of the non-movant. Id. at 255. “Credibility 17 determinations, the weighing of the evidence, and the drawing of legitimate inferences from the 18 facts are jury functions, not those of a judge.” Id. (citation omitted). “The mere existence of a 19 scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be 20 evidence on which the jury could reasonably find for the plaintiff.” Id. at 242. 21 DISCUSSION 22 After hearing the arguments of the parties, I find that there are material facts in dispute 23 with respect to both of plaintiffs’ causes of action. This matter will proceed to trial. 24 The cornerstone of the inquiry into whether Three Rivers is liable as a successor to Quality 25 for the purposes of the MPPAA is whether Three Rivers took over the bulk Quality’s customer 26 base. Resilient Floor Covering Pension Tr. Fund Bd. of Trustees v. Michael’s Floor Covering, 27 1 Inc., 801 F.3d 1079, 1095-96 (9th Cir. 2015). The evidence here is disputed and unclear. The 2 parties do not dispute that the Collective Bargaining Agreement (“CBA”) that Quality entered into 3 prohibited it from working with non-union subcontractors. Nor do they dispute that all of Three 4 Rivers’s brokers were also brokers for Quality (or had purchased the assets of a broker for 5 Quality). They do dispute whether Three Rivers serviced non-union customers that Quality was 6 not able to service due to the CBA, thus making it impossible for Three Rivers to “take[] over the 7 economically critical bulk of [Quality’s] customer base.” Id. at 1084. 8 Three Rivers asserts that “Quality was purportedly no longer allowed to work with non- 9 union brokers such as Sherman Loehr and A&P, etc.” Dkt. No. 50 at 24. Rodriguez, Three 10 Rivers’s founder, stated that “[u]pon information and belief, on or about July 2014, Plaintiff no 11 longer permitted Quality nor any other companies in Plaintiff’s union to work with non-union 12 brokers,” Dkt. No. 50-1 ¶ 19, and Paiva (who ran Quality) stated that “[o]n or about 2014, Sam 13 Trejio and Vincent Echeverria, from the local union DC16 informed me that the new collective 14 bargaining agreement would no longer allow companies like Quality to work with non-union 15 brokers as Quality had been.” Dkt. No. 50-3 ¶ 27. During oral argument, defendants made a 16 slightly different argument, contending that Three Rivers’s customer base was different from 17 Quality’s because the brokers, who are able to work with multiple contractors and are not strictly 18 union or non-union, serviced different end-customers for both “union jobs” and “non-union jobs.” 19 They stated that Three Rivers’s business model was to service end-customers that would not 20 employ union contractors like Quality, and pointed out that between 2010 and 2014, both 21 companies were not only in operation but also grew at the same time. 22 Plaintiffs contend that Three Rivers and Quality shared a customer base because both 23 companies employed the same brokers. According to plaintiffs, the end-customers are irrelevant 24 because they do not pay Three Rivers and Quality. Michael’s Floor Covering does not directly 25 define “customer,” but suggests that customers are those that contribute to a company’s revenue. 26 801 F.3d at 1097 (discussing utility of “a measure of the billings on the jobs worked for 27 continuing customers by the old and new companies [], as pension fund contributions are usually 1 the relevant “customer base” includes the brokers or just the end-customers. There is both a 2 factual and perhaps a legal question as to what impact, if any, the end-customer jobs have on the 3 analysis of “customer base” as contemplated by Michael’s Floor Covering. 4 Adding support to defendants’ position, they assert that (i) Quality stopped being able to 5 work with its brokers (e.g., Dynamic Commercial Flooring, A&P Floor Company, Sherman- 6 Loehr, and Capital Commercial Flooring) in 2014 because they decided to go “non-union”; (ii) the 7 brokers are hired by end-customers for union and non-union jobs such that the brokers could hire 8 Three Rivers for jobs that Quality could not perform; and (iii) Three Rivers’s business model was 9 to service the customers that Quality could not due to the requirements of the brokers or their end- 10 customers and Quality’s obligations under the CBA. Plaintiffs’ evidence did not address this. 11 And there is a separate issue whether the undisputed facts show that Three Rivers had actual 12 notice of Quality’s withdrawal liability prior to the time it became a successor. 13 For alter-ego liability, there is a material issue of fact regarding common ownership and 14 management. To establish liability pursuant to the “alter-ego” doctrine, plaintiffs must prove “(1) 15 that the two firms have ‘common ownership, management, operations, and labor relations,’ and 16 (2) that the non-union firm is used ‘in a sham effort to avoid collective bargaining obligations.’” 17 Resilient Floor Covering Pension Fund v. M&M Installation, Inc., 630 F.3d 848, 852 (9th Cir. 18 2010). 19 The parties dispute whether Quality and Three Rivers have common ownership and 20 management. Some documents filed with the State of California indicate common ownership. 21 See, e.g., Dkt. No. 48-7 at 91-92. But Rodriguez, Paiva, and several employees of both Quality 22 and Three Rivers testified that Paiva was the owner of Quality and Rodriguez was the owner of 23 Three Rivers. See, e.g., Dkt. No. 48-3 12:22-24; Dkt. No. 48-4 15:9-14, 2:25-26:1; Dkt No. 50-1 24 ¶¶ 5-6; Dkt. No 50-3 ¶¶ 6-7. Three Rivers presented evidence that the two companies operated 25 alongside one another from 2010 until 2014, either competing against each other or servicing 26 different customers, before Quality went out of business. There is no evidence that Rodriguez 27 received any profits from Quality or that Paiva received profits from Three Rivers, and defendants 1 regard to ownership and management of the companies for the purpose of alter-ego liability. 2 CONCLUSION 3 Because there are triable issues of fact concerning both successor and alter-ego liability, 4 || plaintiffs’ motion for summary judgment is DENIED. The trial is set for April 6, 2020, to 5 |} continue through April 8 as needed. The pretrial conference is set for March 23, 2020 at 2:00 6 || pm. Ifthe parties are not available on these dates, they shall contact Ms. Davis at 7 Jean_Davis @cand.uscourts.gov to arrange a telephonic trial setting conference. 8 IT IS SO ORDERED. 9 Dated: January 29, 2020 10 . 11 liam H. Orrick 12 United States District Judge
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