Crane v. Green & Freedman Baking Co.

                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-