Massachusetts Carpenters Central Collection Agency v. Belmont Concrete Corp.

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.