Resilient Floor Covering Pension Trust Fund Board of Trustees v. Michael's Floor Covering, Inc. , 801 F.3d 1079 ( 2015 )


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  •                      FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    RESILIENT FLOOR COVERING                         No. 12-17675
    PENSION TRUST FUND BOARD OF
    TRUSTEES; RESILIENT FLOOR                          D.C. No.
    COVERING PENSION TRUST FUND,                    3:11-cv-05200-
    Plaintiffs-Appellants,                 JSC
    v.
    OPINION
    MICHAEL’S FLOOR COVERING, INC.,
    Defendant-Appellee.
    Appeal from the United States District Court
    for the Northern District of California
    Jacqueline Scott Corley, Magistrate Judge, Presiding
    Argued and Submitted
    February 10, 2015—San Francisco, California
    Filed September 11, 2015
    Before: Richard A. Paez and Marsha S. Berzon, Circuit
    Judges and David A. Ezra,* District Judge.
    Opinion by Judge Berzon
    *
    The Honorable David A. Ezra, District Judge for the U.S. District
    Court for the Western District of Texas, sitting by designation.
    2     RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    SUMMARY**
    Labor Law
    The panel reversed the district court’s judgment, after a
    bench trial, holding that a construction industry employer was
    not subject to “withdrawal liability” under the Multiemployer
    Pension Plan Amendments Act.
    The MPPAA amendments to the Employee Retirement
    Income Security Act provide that if an employer withdraws
    from a multiemployer pension plan, then it is liable to the
    plan for “withdrawal liability.” There is an exception to
    withdrawal liability for a construction industry employer that
    ceases operations entirely for at least five years.
    Agreeing with the Seventh Circuit, the panel held that a
    bona fide successor employer in general, and a construction
    industry successor employer in particular, can be subject to
    MPPAA withdrawal liability, so long as the successor took
    over the business with notice of the liability. The panel held
    that the most important factor in assessing whether an
    employer is a successor for purposes of withdrawal liability
    is whether there was substantial continuity in the business
    operations between the predecessor and the successor, as
    determined in large part by whether the new employer has
    taken over the economically critical bulk of the prior
    employer’s customer base.
    **
    This summary constitutes no part of the opinion of the court. It has
    been prepared by court staff for the convenience of the reader.
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.        3
    V. MICHAEL’S FLOOR COVERING
    The panel held that the district court erred in weighing
    continuity of the workforce as the most important factor, and,
    moreover, applied an incorrect test to determine whether
    there was continuity of the workforce. The panel reversed
    and remanded for further proceedings applying the correct
    standards.
    COUNSEL
    Donna L. Kirchner (argued), Katherine McDonough, George
    M. Kraw, Kraw and Kraw Law Group, Mountain View,
    California, for Plaintiffs-Appellants.
    Robert B. Miller (argued), Kilmer, Voorhees & Laurick, PC,
    Portland, Oregon, for Defendant-Appellees.
    OPINION
    BERZON, Circuit Judge:
    We decide in this case two related issues: (1) whether a
    successor employer, both generally and in the construction
    industry in particular, can be subject to withdrawal liability
    under the Multiemployer Pension Plan Amendments Act
    (“MPPAA”), 29 U.S.C. § 1381–1453, amendments to the
    Employee Retirement Income Security Act (“ERISA”),
    29 U.S.C. § 1001 et seq.; and (2) if so, what factors are most
    relevant to determining whether a construction industry
    employer is a successor for purposes of imposing MPPAA
    withdrawal liability. We conclude that a construction
    industry successor employer can be subject to MPPAA
    4    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    withdrawal liability, so long as the successor took over the
    business with notice of the liability. We also hold that the
    most important factor in assessing whether an employer is a
    successor for purposes of imposing MPPAA withdrawal
    liability is whether there is substantial continuity in the
    business operations between the predecessor and the
    successor, as determined in large part by whether the new
    employer has taken over the economically critical bulk of the
    prior employer’s customer base.
    The district court, after a bench trial, held Defendant-
    Appellee Michael’s Floor Covering, Inc. (“Michael’s”) not
    liable as a successor employer. In doing so, the district court
    weighed continuity of the workforce as the most important
    factor, and, moreover, applied an incorrect test to determine
    whether there was continuity of the workforce. We therefore
    reverse and remand for further proceedings applying the
    correct standards.
    I.
    A.
    Studer’s Floor Covering, Inc. (“Studer’s”) was a
    construction industry employer that sold and installed floor
    covering materials to commercial and residential customers.
    From the 1960s until it ceased doing business on December
    31, 2009, Studer’s operated out of a storefront and warehouse
    on Anderson Avenue in Vancouver, Washington. At the time
    of its closing, Studer’s was a party to a collective bargaining
    agreement with the Linoleum, Carpet and Soft Tile
    Applicators Local Union No. 1236, pursuant to which
    Studer’s made contributions to the Resilient Floor Covering
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.                        5
    V. MICHAEL’S FLOOR COVERING
    Pension Trust Fund (“the Fund”), a multiemployer defined
    benefit pension plan covered by the MPPAA amendments to
    ERISA. See 29 U.S.C. § 1002(37)(A).
    Toward the end of 2009, the president and chairman of
    Studer’s, Scott Studer, informed his sales staff that Studer’s
    would close at the end of the year. Shortly after that
    announcement, one of those staff members, Michael Haasl,
    told Studer “that he intended to bid for projects for the sale
    and installation of floor covering materials for his own
    company,” Michael’s Floor Covering, LLC (“Michael’s”).
    Haasl incorporated Michael’s in October 2009.1
    On November 30, 2009, while Studer’s was still in
    operation, Michael’s obtained a lease on the same storefront
    and warehouse Studer’s had long occupied. That lease’s term
    began on January 1, 2010, the day immediately after
    1
    We note that the record in this case was sealed in the district court.
    Under this Court’s rules, that sealing remains in effect on appeal unless we
    rule otherwise, which neither party in this case asked us to do. 9th Cir. R.
    27-13. We note, however, that the sealing of several key documents,
    including Michael’s’ business plan, has somewhat hampered our ability
    fully to explain our ruling in this precedential opinion. Further, we have
    noticed an overall tendency recently for parties to request, and district
    courts to grant, the sealing of records in instances in which it is hard to see
    any significant privacy or trade secret justification.
    We could, of course, request the parties to show cause as to why the
    record should not be unsealed in whole or in part. But that process would
    take time and effort away from the preparation of the opinion. We have
    therefore chosen instead to issue an opinion that does not contain all the
    facts in the record supporting it. Our need to choose between undesirable
    options suggests the need to reconsider record sealing practices both in the
    district courts and in this court.
    6    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    Studer’s’ lease terminated. Around the same time, Haasl
    purchased signs for the Michael’s location very similar to
    those that Studer’s used. Both spelled out the name
    “Michael’s”/“Studer’s” in red cursive, and “Floor Coverings”
    in black block capitals, on a white background. Additionally,
    at Michael’s’ request, Studer’s gave its authorization to
    Quest, Studer’s’ telephone service provider, for Michael’s to
    take over Studer’s’ business telephone numbers at the end of
    2009.
    Studer’s sold most, though not all, of its tools, equipment,
    and inventory at a publicly advertised liquidation sale in the
    fall of 2009. At that sale, Michael’s purchased about 30% of
    Studer’s’ tools, equipment and inventory.
    According to Scott Studer, although “Studer’s did not sell,
    give[,] or otherwise assign its customer lists or any portion of
    its customer information to Michael’s[,] Mike Haasl knew the
    identity of many of Studer’s[’] customers and suppliers
    through his work over the course of 19 years as a salesman
    for Studer’s.” Michael’s used those existing business
    relationships in developing its business.
    The district court found that “Michael’s performs much
    the same work as Studer’s,” though Michael’s added product
    lines to its showroom that Studer’s had not carried. For
    example, the purchasing manager for one major business
    customer of both Studer’s and Michael’s, New Tradition
    Homes, testified that Michael’s was asked to “pick up where
    [Studer’s] left off” and did; that “the type of work done” by
    Michael’s and Studer’s was “[t]he same”; and that there were
    no “differences in the type of work done by Michael’s Floor
    Covering as opposed to what was done by Studer’s Floor
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.          7
    V. MICHAEL’S FLOOR COVERING
    Covering.” That same purchasing manager also reported that
    New Tradition Homes did not “put out a request for bids to
    replace Studer’s.” Although New Tradition Homes’ “usual
    bid process” did involve competitive bidding from “a broader
    number of potential suppliers,” it did not require bidding in
    this instance, because a “sales rep that [they] were very
    comfortable with was starting his business,” referring to
    Haasl and Michael’s. He also noted that there was only
    “[v]ery minimal” “disruption caused by the transition from
    Studer’s to Michael’s”: “[m]ostly it was internal with our
    systems. We had to make sure that our purchase orders went
    out on one day to Studer’s and then on the next day to
    Michael’s Floor Coverings.”
    In Michael’s’ first two years of operation, it employed
    eight installers; otherwise, Michael’s outsourced installation
    work to independent contractors. Of the eight employee
    installers, five had previously worked for Studer’s at one time
    or another. Several of those installers stated that the range of
    work they did for Michael’s was substantially similar to,
    although slightly broader than, the work they had previously
    done for Studer’s.
    The proportion of Studer’s customers retained by
    Michael’s depends on the mode of calculation used. The
    district court found that “many of Studer’s[’] customers
    became Michael’s[’] customers.” The Fund asserts that
    Michael’s obtained the bulk of its business during its start-up
    phase from Studer’s’ customers, largely business customers.
    For example, all but seven of Michael’s’ business customers
    in its first three months of operation had been Studer’s’
    customers during Studer’s last year of business. Michael’s
    counters that only 80 or so of the 868 customers Michael’s
    8    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    served in its first two years were former Studer’s clients; this
    head count includes both large commercial customers with
    repeat contracts for housing developments and apartment
    buildings, and individual homeowners, who are more likely
    to contract on a one-time basis and for fairly small jobs.
    B.
    The MPPAA amendments to ERISA provide, in part, that
    “[i]f an employer withdraws from a multiemployer [pension]
    plan in a complete withdrawal . . . , then the employer is
    liable to the plan” for “withdrawal liability.” 29 U.S.C.
    § 1381(a).2 Withdrawal liability “is the amount determined
    [under the statutory calculation method] . . . to be the
    allocable amount of unfunded vested benefits” accrued at the
    time of the employer’s withdrawal. § 1381(b); see also
    § 1391. For “employer[s] that ha[ve] an obligation to
    contribute under a plan for work performed in the building
    and construction industry,” however, there is no withdrawal
    liability if they cease operations entirely for at least five
    years. § 1383(b)(1). The dispute in this case concerns
    whether this construction industry exception applies here
    because Studer’s permanently ceased performing work
    covered by the Fund, or whether, instead, it does not apply,
    because Michael’s essentially took over the work Studer’s
    would have done, yet did not make contributions to the Fund.
    Taking the latter position, the Fund, believing Michael’s
    to be Studer’s’ successor, assessed withdrawal liability in the
    amount of $2,291,014.00 against Studer’s and Michael’s and
    2
    Hereafter, all statutory references are to Chapter 29 of the United
    States Code unless otherwise indicated.
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.         9
    V. MICHAEL’S FLOOR COVERING
    sued Michael’s to recover that amount. After discovery, the
    Fund and Michael’s filed cross-motions for summary
    judgment. Michael’s moved for summary judgment on the
    grounds that the Fund could not establish that Michael’s was
    a successor of Studer’s, and, even if Michael’s were Studer’s’
    successor, the Fund could not show Michael’s was subject to
    its predecessor’s withdrawal liability, for two reasons: first,
    Studer’s had not itself continued business in the area; and
    second, Michael’s did not have adequate notice of Studer’s’
    liability. The Fund moved for partial summary judgment on
    the ground that Michael’s was a successor to Studer’s, so a
    statutory withdrawal triggering liability occurred when
    Michael’s continued Studer’s’ business but failed to make
    contributions to the Fund.
    At the hearing on the parties’ cross-motions for summary
    judgment, the district court suggested that the parties consent
    to converting the motion to a bench trial on the successorship
    question only (that is, not on the question whether, if a
    successor, Michael’s had sufficient notice of the liability).
    The parties orally agreed to a bench trial “on the record.”
    About two weeks after the summary judgment hearing,
    the Fund filed a motion for leave to supplement the record
    with additional invoices from Michael’s and Studer’s. The
    Fund noted that the possibility of a bench trial on the record
    was first raised at the summary judgment hearing, and
    explained that, “[h]aving given the matter consideration after
    the hearing,” the Fund wished to supplement the record with
    these additional invoices. The Fund had previously included
    Studer’s invoices from the last three months of 2009 and
    Michael’s invoices from the first three months of 2010.
    “[F]or purposes of creating a more complete trial record,” the
    10 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    Fund explained, it was seeking to submit Michael’s’ invoices
    for the remainder of 2010 and the entirety of 2011, and some
    additional Studer’s invoices as well. Michael’s opposed the
    motion on the grounds that (1) it was “premature” and (2) the
    evidence “lack[ed] relevance, materiality or probity” because
    there was no “basis for imposing withdrawal liability on
    Studer’s,” when Studer’s did not continue work as Studer’s
    after 2009.
    The district court issued findings of fact and conclusions
    of law on November 1, 2012. It determined that Michael’s
    was not a successor to Studer’s and therefore not subject to
    withdrawal liability. Applying the multi-factor successorship
    test set forth in NLRB v. Jeffries Lithograph Co., 
    752 F.2d 459
    , 463 (9th Cir. 1985), the district court concluded that,
    although Michael’s used the same plant that Studer’s had, the
    other factors either weighed against a finding of
    successorship (continuity of the workforce; whether the same
    jobs exist under the same working conditions; whether the
    same supervisors were employed) or were neutral (whether
    the same machinery, equipment, and methods of production
    are used; whether the same service is offered; and whether
    there was substantial continuity of the business). The district
    court characterized the inquiry as concerning whether the
    successor has “‘basically the same owners and operators as
    . . . the predecessor employer,’” and that the “changes
    between predecessor and successor were technical in nature
    rather than a substantive change in the management.’”
    (quoting New England Mech., Inc. v. Laborers Local Union
    294, 
    909 F.2d 1339
    , 1343 (9th Cir. 1990)). According to the
    district court, “[t]he question here is whether Michael’s is
    ‘essentially the same’ as Studer’s. . . . It is not.”
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.       11
    V. MICHAEL’S FLOOR COVERING
    The district court also denied the Fund’s motion to
    supplement the record, because the Fund had not shown
    “good cause for the late filing,” and because the “customer
    issue [wa]s not dispositive of the successor employer
    determination.”
    II.
    “We review the district court’s findings of fact after a
    bench trial for clear error.” OneBeacon Ins. Co. v. Haas
    Indus., Inc., 
    634 F.3d 1092
    , 1096 (9th Cir. 2011). “Questions
    of law and mixed questions of fact and law are reviewed de
    novo.” M.M. v. Lafayette Sch. Dist., 
    767 F.3d 842
    , 851 (9th
    Cir. 2014) (as amended). Additionally, “[w]e review for
    abuse of discretion a district court’s denial of a motion to
    supplement the record.” E.E.O.C. v. Peabody W. Coal Co.,
    
    773 F.3d 977
    , 982 (9th Cir. 2014). A district court abuses its
    discretion where it applies the wrong legal standard or where
    its “application of the correct legal standard was
    (1) ‘illogical,’ (2) ‘implausible,’ or (3) without ‘support in
    inferences that may be drawn from the facts in the record.’”
    United States v. Hinkson, 
    585 F.3d 1247
    , 1262 (9th Cir. 2009)
    (en banc) (quoting Anderson v. City of Bessemer City,
    
    470 U.S. 564
    , 577 (1985)). Additionally, “‘[i]f an exercise of
    discretion is based on an erroneous interpretation of the law,
    the ruling should be overturned.’” Estate of Darulis v.
    Garate, 
    401 F.3d 1060
    , 1063 (9th Cir. 2005) (quoting Miles
    v. California, 
    320 F.3d 986
    , 988 (9th Cir. 2003)); see also
    Conservation N.W. v. Sherman, 
    715 F.3d 1181
    , 1185 (9th Cir.
    2013).
    12 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    III.
    A.
    ERISA, the federal comprehensive private employee
    benefits statute, includes provisions designed “to ensure that
    employees and their beneficiaries would not be deprived of
    anticipated retirement benefits by the termination of pension
    plans before sufficient funds have been accumulated in the
    plans.” Pension Benefit Guar. Corp. v. R.A. Gray & Co.,
    
    467 U.S. 717
    , 720 (1984). ERISA originally sought to
    accomplish this purpose by creating an insurance program for
    pension plans, administered by the Pension Benefit Guaranty
    Corporation (“PBGC”); the insurance program initially
    covered only single-employer plans, but was later extended
    to multiemployer plans. See 
    id. at 720–22
    (noting that the
    provision obligating the PBGC to pay benefits for single
    employer plans took effect immediately when ERISA was
    enacted in 1974 and that mandatory coverage of
    multiemployer pension plans was to take effect in 1978).
    The MPPAA amendments to ERISA were prompted by
    Congress’s realization that in some instances, ERISA as it
    stood did “not adequately protect [multiemployer pension]
    plans from the adverse consequences that resulted when
    individual employers terminate[d] their participation in, or
    withdr[e]w from, multiemployer plans.” 
    Id. at 722.
    The
    concern was that “a significant number of [multiemployer]
    plans were experiencing extreme financial hardship” as a
    result of individual employer withdrawals from the plans,
    which saddled the remaining employers with increased
    funding obligations. 
    Id. at 721.
    These withdrawals caused a
    domino effect of cascading additional withdrawals that
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.      13
    V. MICHAEL’S FLOOR COVERING
    eventually “could have resulted in the termination of
    numerous plans.” 
    Id. Large numbers
    of plan terminations, in
    turn, could have jeopardized the entire PBGC insurance
    program once the provision extending coverage to
    multiemployer plans became effective. See 
    id. To address
    this dilemma, Congress enacted the MPPAA,
    which imposed “new rules under which a withdrawing
    employer would be required to pay whatever share of the
    plan’s unfunded vested liabilities was attributable to that
    employer’s participation,” thereby protecting the financial
    health of the plan and safeguarding the PBGC insurance
    program. 
    Id. at 723.
    The MPPAA amendments to ERISA
    make employers liable for unfunded vested benefits if they
    withdraw from a multiemployer plan. § 1381; see also
    § 1391. In general, a complete withdrawal triggers
    withdrawal liability where an employer “permanently ceases
    to have an obligation to contribute under the plan” or
    “permanently ceases all covered operations under the plan.”
    § 1383(a).
    But that general standard for withdrawal, and so for
    withdrawal liability, does not always apply. Central to this
    case is the special MPPAA rule for “employer[s] that ha[ve]
    an obligation to contribute under a plan for work performed
    in the building and construction industry.” § 1383(b)(1).
    Under that rule, a complete withdrawal occurs only if:
    (A) an employer ceases to have an obligation
    to contribute under the plan, and
    (B) the employer—
    14 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    (i) continues to perform work in the
    jurisdiction of the collective bargaining
    agreement of the type for which contributions
    were previously required, or
    (ii) resumes such work within 5 years after the
    date on which the obligation to contribute
    under the plan ceases, and does not renew the
    obligation at the time of the resumption.
    § 1383(b)(2). In other words, under § 1383(b), known as “the
    MPPAA construction industry exception,” employers in that
    industry who entirely cease operations are not subject to the
    withdrawal liability that § 1381 would otherwise impose,
    unless they resume construction work within five years
    without also renewing their obligation to contribute to the
    plan. See Carpenters Pension Trust Fund for N. Cal. v.
    Underground Constr. Co., 
    31 F.3d 776
    , 779 (9th Cir. 1994).
    In enacting the MPPAA, Congress “recognized the
    transitory nature of contracts and employment in the building
    and construction industry.” 
    Id. at 778.
    The exception is
    rooted in the understanding that “[construction industry]
    employers [will] come and go[,] [but] as long as the base of
    construction projects in the area covered by the plan
    [continues] funding the plan’s obligations, the plan is not
    threatened” by an individual employer’s departure. 
    Id. It is
    on this premise that § 1383(b) “aims to extract withdrawal
    contributions only from those employers who may threaten
    the plan by reducing the plan’s contribution base,” that is,
    those employers who continue to do work in the area covered
    by the plan without contributing to it. 
    Id. The “contribution
         RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.      15
    V. MICHAEL’S FLOOR COVERING
    base” concept is thus at the core of the MPPAA construction
    industry withdrawal liability concept.
    We have previously recognized the centrality of the
    contribution base in applying the construction industry
    exception to MPPAA withdrawal liability. In H.C. Elliott,
    Inc. v. Carpenters Pension Trust Fund for Northern
    California, 
    859 F.2d 808
    (9th Cir. 1988), we observed that
    “[i]n the construction industry, the funding base of the plan
    is the construction projects in the area” where the plan is
    administered. 
    Id. at 812
    (quoting H.R. Rep. No. 96-869, 96th
    Cong., 2d Sess., pt. 1, at 75 (1980)). We noted further that
    “as long as contributions are made for whatever work is done
    in the area,” there is no threat to the plan’s future funding
    viability; if an individual employer withdraws and goes out
    of business, other employers who contribute to the pension
    plan on behalf of their employees will perform that work. 
    Id. (quoting H.R.
    Rep. No. 96-869, at 75).
    As we have also explained, “[t]he withdrawal of an[]
    employer from the plan does decrease the [funding] base . . .
    if the employer stays in the industry but goes non-union and
    ceases making payments to the plan.” 
    Id. (emphasis added).
    In that case, employers continue to undertake construction
    work without contributing to the plan. So, assuming a
    constant number of construction projects in a locale, the
    number of employee hours for which contributions are made
    will go down.
    In short, because of concern about shrinking contribution
    bases, the § 1383(b) construction industry exception imposes
    withdrawal liability on employers who cease making
    16 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    payments to the plan while continuing to do business in the
    area.
    B.
    In the fields of labor and employment law, federal courts
    have developed a common-law doctrine of successorship
    liability that “provides an exception from the general rule that
    a purchaser of assets does not acquire a seller’s liabilities.”
    Chi. Truck Drivers, Helpers & Warehouse Workers Union
    (Indep.) Pension Fund v. Tasemkin, Inc., 
    59 F.3d 48
    , 49 (7th
    Cir. 1995). The successorship doctrine extends to legal
    obligations arising under the National Labor Relations Act
    (“NLRA”), the Fair Labor Standards Act (“FLSA”), Title VII
    of the Civil Rights Act of 1964 (“Title VII”), and the Family
    and Medical Leave Act (“FMLA”), among others. See, e.g.,
    Fall River Dyeing & Finishing Corp. v. NLRB, 
    482 U.S. 27
    (1987) (NLRA); Steinbach v. Hubbard, 
    51 F.3d 843
    (9th Cir.
    1995) (FLSA); Bates v. Pac. Maritime Ass’n, 
    744 F.2d 705
    (9th Cir. 1984) (Title VII); Sullivan v. Dollar Tree Stores,
    Inc., 
    623 F.3d 770
    , 780–81 (9th Cir. 2010) (recognizing
    regulations that incorporate common law successorship
    principles in defining successors-in-interest for purposes of
    FMLA liability).
    Striking a “balance between the need to effectuate federal
    labor and employment . . . policies and the need . . . to
    facilitate the fluid transfer of corporate assets,” the
    successorship doctrine, when applicable, holds legally
    responsible for obligations arising under federal labor and
    employment statutes businesses that are substantial
    continuations of entities with such obligations. Upholsterers’
    Int’l Union Pension Fund v. Artistic Furniture of Pontiac,
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.          17
    V. MICHAEL’S FLOOR COVERING
    
    920 F.2d 1323
    , 1326 (7th Cir. 1990). “The inquiry [in these
    successorship cases] is [therefore] not merely whether the
    new employer is a ‘successor’ in the strict corporate-law
    sense of the term. The successorship inquiry in the labor-law
    context is much broader.” 
    Sullivan, 623 F.3d at 781
    .
    “The primary question in [labor and employment]
    successorship cases is whether, under the totality of the
    circumstances, there is ‘substantial continuity’ between the
    old and new enterprise.” Haw. Carpenters Trust Funds v.
    Waiola Carpenter Shop, Inc., 
    823 F.2d 289
    , 294 (9th Cir.
    1987); see also New England Mech., Inc. v. Laborers Local
    Union 294, 
    909 F.2d 1339
    , 1342 (9th Cir. 1990); 
    Steinbach, 51 F.3d at 846
    . To address whether the new business is the
    successor of an old business, we consider the following
    factors, which are “not . . . exhaustive”:
    [Whether] there has been a substantial
    continuity of the same business operations[;]
    [whether] the new employer uses the same
    plant; [whether] the same or substantially the
    same work force is employed; [whether] the
    same jobs exist under the same working
    conditions; [whether] the same supervisors are
    employed; [whether] the same machinery,
    equipment, and methods of production are
    used; and [whether] the same product is
    manufactured or the same service [is] offered.
    Jeffries 
    Lithograph, 752 F.2d at 463
    (quoting Premium
    Foods, Inc., 
    260 N.L.R.B. 708
    , 714 (1982), enforced 
    709 F.2d 623
    (9th Cir. 1983)) (last alteration in original); see also Haw.
    
    Carpenters, 823 F.2d at 294
    . Other cases have considered
    18 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    whether the body of customers is the same. See, e.g., Fall
    River 
    Dyeing, 482 U.S. at 43
    .
    “There is, and can be, no single definition of ‘successor’
    which is applicable in every legal context. A new employer
    . . . may be a successor for some purposes and not for others.”
    Howard Johnson Co. v. Detroit Local Joint Exec. Bd., Hotel
    & Rest. Emps. & Bartenders Int’l Union, AFL-CIO, 
    417 U.S. 249
    , 262 n. 9 (1974). “[D]ecisions on successorship must
    balance, inter alia, the national policies underlying the statute
    at issue and the interests of the affected parties,” 
    Sullivan, 623 F.3d at 782
    (quoting 
    Steinbach, 51 F.3d at 846
    )
    (alteration in original). “Because the origins of successor
    liability are equitable, fairness is a prime consideration in its
    application.” 
    Id. (Quoting Criswell
    v. Delta Air Lines, Inc.,
    
    868 F.2d 1093
    , 1094 (9th Cir. 1989)). Thus, these decisions
    require[] analysis of the interests of the new
    employer and the employees and of the
    policies of the labor laws in light of the facts
    of each case and the particular legal obligation
    which is at issue, whether it be the duty to
    recognize and bargain with the union, the duty
    to remedy unfair labor practices, the duty to
    arbitrate, etc.
    
    Id. (quoting Howard
    Johnson, 417 U.S. at 262 
    n.9). The
    individual successorship factors outlined in Jeffries are,
    accordingly, given greater or lesser weight depending on the
    statutory context.
    Moreover, “in light of . . . the myriad factual
    circumstances and legal contexts in which [the employment
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.       19
    V. MICHAEL’S FLOOR COVERING
    law successorship issue] can arise, and the absence of
    congressional guidance as to its resolution, emphasis on the
    facts of each case as it arises is especially appropriate.”
    Howard 
    Johnson, 417 U.S. at 256
    . Finally, as the
    successorship test is “more functional than formal,” “the
    absence of one . . . factor” does not compel a particular
    conclusion. Hawaii 
    Carpenters, 823 F.2d at 293
    , 294.
    Depending on the statutory context and the type of claim,
    certain factors may warrant greater or lesser emphasis. For
    example, under § 8(a)(5) of the NLRA, which imposes on
    employers a duty to bargain in good faith with the chosen
    representative of their employees, the NLRB has determined
    “substantial continuity” with an emphasis on “the employees’
    perspective.” Fall River 
    Dyeing, 482 U.S. at 43
    . The reason
    for this emphasis is that a successor’s § 8(a)(5) duty to
    bargain in good faith derives from the rebuttable presumption
    of majority support a union obtains once it has been certified
    as the unit’s bargaining representative. 
    Id. at 37–38.
    The
    majority presumption generally furthers the NLRA’s
    “overriding policy” of “‘industrial peace’” by “promot[ing]
    stability in collective-bargaining relationships.” 
    Id. at 38
    (quoting Terrell Machine Co., 
    173 N.L.R.B. 1480
    (1969),
    enf’d, 
    427 F.2d 1088
    (4th Cir.), cert. denied, 
    398 U.S. 929
    (1970)) (some internal quotation marks omitted) (alteration
    in original). Requiring a successor to bargain with the
    incumbent union even after a change in corporate structure
    assures employees that their choice of representative is not
    “subject to the vagaries of an enterprise’s transformation,”
    and so promotes industrial peace. 
    Id. at 39–40.
    Further, “a
    mere change in ownership, without an essential change in
    working conditions, is not likely to change employees’
    attitudes toward union representation.” Jeffries Lithograph,
    20 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR 
    COVERING 752 F.2d at 463
    . Consequently, when determining whether
    a company is a successor with a duty to recognize and
    bargain with the incumbent union, “the touchstone remains
    whether there was an ‘essential change in the business
    that could have affected employee attitudes toward
    representation.’” 
    Id. at 464.
    At the same time, in the collective bargaining context, a
    successor is only obligated to bargain when “the new
    employer makes a conscious decision to maintain generally
    the same business and to hire a majority of its employees
    from the predecessor . . . [and indeed] intends to take
    advantage of the trained work force of its predecessor.” Fall
    River 
    Dyeing, 482 U.S. at 41
    . Thus limited, the doctrine
    safeguards employers’ interest in being able to rearrange or
    sell their business for legitimate purposes. 
    Id. Balancing these
    pertinent considerations, courts determine successorship
    in the context of the NLRA duty to bargain by examining,
    among other factors, “whether the business of both employers
    is essentially the same; whether the employees of the new
    company are doing the same jobs in the same working
    conditions under the same supervisors; and whether the new
    entity has the same production process, produces the same
    products, and basically has the same body of customers,” Fall
    River 
    Dyeing, 482 U.S. at 43
    , all while “keep[ing] in mind the
    question whether those employees who have been retained
    will understandably view their job situations as essentially
    unaltered.” 
    Id. (quoting Golden
    State Bottling Co. v. NLRB,
    
    414 U.S. 168
    , 184 (1993)).
    By contrast, in a different NLRA context—deciding
    whether to impose successor liability for a predecessor’s
    unfair labor practices—the Supreme Court placed the
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.         21
    V. MICHAEL’S FLOOR COVERING
    emphasis on the employers’ economic considerations, while
    continuing to take the employees’ perspective into account.
    Golden State Bottling determined that a successor could be
    required to remedy its predecessor’s unlawful discharge of an
    employee under §§ 8(a)(3) and (1) of the NLRA so long as
    (1) the successor had obtained substantial assets of the
    predecessor; (2) there were sufficient indicia of substantial
    continuity of business operations; and (3) the successor took
    over with notice of the unfair labor practice 
    liability. 414 U.S. at 184
    –85. Golden State Bottling explained that the
    policies that allow employees to engage in protected
    concerted activity without incurring retribution support this
    approach where the predecessor entity engaged in unfair labor
    practices. “Avoidance of labor strife, prevention of a deterrent
    effect on the exercise of rights guaranteed by § 7 of the
    [NLRA], . . . and protection for the victimized employee”
    were all “important policies” that would be undermined
    absent the imposition of successor liability for unfair labor
    practices. 
    Id. at 185.
    Taking those policies into account,
    Golden State Bottling held that a successor employer is liable
    for remedying a predecessor’s violation of its employees’
    organizational rights “[w]hen a new employer . . . has
    acquired substantial assets of its predecessor and continued,
    without interruption or substantial change, the predecessor’s
    business operations.” 
    Id. at 184.
    If successor liability were
    not imposed under those circumstances, “the successor may
    benefit from the unfair labor practices due to a continuing
    deterrent effect on union activities.” 
    Id. Turning to
    fairness to employers, Golden State Bottling
    held that successor employers would be held liable only when
    they took over the business with notice of the liability. 
    Id. at 185.
    With that protection, the liability could “be reflected in
    22 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    the price [it] pays for the [predecessor’s] business” assets. 
    Id. By focusing
    on the economic realities of the business
    transition, Golden State Bottling adapted the successorship
    doctrine to address a successor’s liability for a predecessor’s
    unfair labor practice.
    The Title VII employment discrimination context
    provides another example of tailoring successorship factors.
    There, the “three principal factors [that] bear[] on the
    appropriateness of successor liability for employment
    discrimination [are]: (1) the continuity in operations and work
    force of the successor and predecessor employers, (2) the
    notice to the successor employer of its predecessor’s legal
    obligation, and (3) the ability of the predecessor to provide
    adequate relief directly.” 
    Bates, 744 F.2d at 709
    –10.
    Imposing successor liability under those circumstances is fair,
    Bates held, even where the successor did not purchase or
    merge with the predecessor, because a successor “well
    aware” of its predecessor’s liability is able to consider that
    information before deciding to continue the predecessor’s
    business. See 
    id. at 710.
    Where such notice is provided, the
    successor’s “choice to take over [its predecessor’s] operations
    informally through the hiring of its former employees and the
    purchase of some of its equipment, rather than through a
    more formal acquisition, [does] not shield it from
    successorship liability.” 
    Id. In sum,
    the cases that have considered in various labor
    and employment law contexts whether an employer is a
    successor have tailored their analyses to the particular policy
    concerns underlying the applicable statute and to the
    particular claim. The successorship standards are flexible and
    must be tailored to the circumstances at hand.
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.                   23
    V. MICHAEL’S FLOOR COVERING
    C.
    We have not previously decided whether a successor
    employer can be subject to MPPAA withdrawal liability.3
    We have, however, held, in a closely related context, that a
    successor can be liable for its predecessor’s delinquent
    ERISA contributions. See Trs. for Alaska Laborers–Constr.
    Indus. Health & Sec. Fund v. Ferrell, 
    812 F.2d 512
    , 516 (9th
    Cir. 1987); Hawaii 
    Carpenters, 823 F.2d at 293
    . Other
    circuits agree with that result. See Einhorn v. M.L. Ruberton
    Constr. Co., 
    632 F.3d 89
    , 98–99 (3d Cir. 2011); Stotter Div.
    of Graduate Plastics Co. v. Dist. 65, UAW, AFL-CIO,
    
    991 F.2d 997
    , 1002 (2d Cir. 1993); Artistic 
    Furniture, 920 F.2d at 1327
    –29.
    We see no reason why the successorship doctrine should
    not apply to MPPAA withdrawal liability just as it does to the
    obligation to make delinquent ERISA contributions. The
    primary reason for making a successor responsible for its
    predecessor’s delinquent ERISA contributions is that,
    “[a]bsent the imposition of successor liability, present and
    future employer participants in the union pension plan will
    bear the burden of [the predecessor’s] failure to pay its
    share,” which will threaten the health of the plan while the
    successor reaps a windfall. Artistic 
    Furniture, 920 F.2d at 1328
    . That rationale applies with equal, if not greater, force
    3
    Resilient Floor Covering Pension Fund v. M&M Installation, Inc.,
    
    630 F.3d 848
    , 852 (9th Cir. 2010) assumed without deciding that a
    company could be held responsible for another entity’s withdrawal
    liability under an alter ego theory. M&M Installation also noted that it was
    not presented with the question whether there were other ways in which
    a company could be responsible for another entity’s ERISA withdrawal
    liability. 
    Id. at 855.
    24 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    to a predecessor’s MPPAA withdrawal liability. A primary
    purpose of ERISA is “to ensure that employees and their
    beneficiaries [a]re not . . . deprived of anticipated retirement
    benefits by the termination of pension plans before sufficient
    funds have been accumulated in the plans.” R.A. Gray & 
    Co., 467 U.S. at 722
    . The MPPAA’s purpose is better to effectuate
    ERISA’s purposes. By assessing proportional liability to
    individual employers who withdraw from a plan, the MPPAA
    avoids overburdening the remaining participating employers
    and increases the likelihood that multiemployer plans remain
    fully funded. See 
    id. at 722–25.
    Contrary to Michael’s’ submissions, “there is no
    underlying congressional policy here militating against the
    imposition of [successor] liability.” Golden State 
    Bottling, 414 U.S. at 181
    . Although Michael’s argues that ERISA
    § 1384, is in tension with application of the traditional
    employment law successorship doctrine to impose withdrawal
    liability on successors, that is not so. First, 28 U.S.C. § 1384
    allows a contributing employer to avoid withdrawal liability
    where it sells its assets in “a bona fide, arm’s-length sale” and
    the purchaser both takes on “an obligation to contribute to the
    plan . . . for substantially the same number of contribution
    base units for which the seller had an obligation to contribute
    to the plan,” § 1384(a)(1), and provides a bond or other
    financial assurance sufficient to cover five years of
    contributions. If the purchaser withdraws from the plan
    within five years, the seller is subject to withdrawal liability
    along with the purchaser. § 1384(a)(1)(C). Although § 1384
    establishes one circumstance in which an employer who
    might—but would not necessarily—otherwise fit into the
    successor category is not liable for withdrawal payments, it
    does not address whether the broader employment and labor
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.           25
    V. MICHAEL’S FLOOR COVERING
    law successorship doctrine applies where those stringent
    conditions are not met.
    Nor does § 1392, which imposes withdrawal liability on
    an employer who engages in “any transaction” for which the
    “principal purpose . . . is to evade or avoid liability under [the
    MPPAA],” suggest any basis for holding the employment and
    labor law successor liability doctrine inapplicable to MPPAA
    withdrawal liability. Section 1392 is essentially punitive. It
    imposes withdrawal liability for “any” purposely evasive or
    devious transaction, regardless of the potential impact on the
    contribution base or on the employees covered by the pension
    plan. Given its punitive focus, § 1392 does not suggest any
    intention to displace the usual employment and labor law
    successorship doctrine, which is remedial rather than punitive
    and so focuses on objective factors, not on the employer’s
    purpose in engaging in the transaction.
    Finally, the narrow construction industry exception to
    MPPAA withdrawal liability is fully consistent with the
    generally applicable successorship doctrine. As explained
    above, the exception recognizes that, so long as a previously
    contributing construction employer ceases doing business at
    the time it withdraws, the funding will remain relatively
    constant. Where that occurs, other contributing employers
    are likely to pick up the construction projects that would
    previously have gone to the withdrawing employer. H.C.
    
    Elliott, 859 F.2d at 812
    . But “[t]he withdrawal of a[]
    [construction] employer from the plan does decrease the
    [funding] base . . . if the employer stays in the industry but
    goes non-union and ceases making payments to the plan.” 
    Id. (emphasis added).
    Then, contributions are not made for the
    construction jobs the employer is continuing to do in the area.
    26 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    
    Id. The same
    detrimental impact occurs where a successor
    business picks up the work the predecessor would have
    performed. Like § 1383(b), which imposes withdrawal
    liability on employers who cease contributing but continue
    working in the area, imposing traditional employment and
    labor law successor liability on employers who substantially
    continue the business of a construction industry predecessor
    without contributing to the plan protects the viability of
    pension funds in the face of a shrinking contribution base.
    For all these reasons, we hold that a bona fide successor
    can be liable for its predecessor’s MPPAA withdrawal
    liability, both in general and with regard to the special
    building and construction trade provisions in particular, so
    long as the successor had notice of the liability.4
    D.
    We now consider how the established successorship
    factors are to be weighed in the context of MPPAA
    withdrawal liability in the construction industry context.
    Keeping in mind the flexible successorship inquiry discussed
    4
    The Seventh Circuit has so indicated as well. See Chicago Truck
    
    Drivers, 59 F.3d at 49
    ; see also Artistic 
    Furniture, 920 F.2d at 1327
    . No
    circuit has held otherwise. Several district courts have reached the same
    conclusion. See, e.g., Cent. States, Se. & Sw. Areas Pension Fund v.
    Hayes, 
    789 F. Supp. 1430
    , 1436 (N.D. Ill. 1992) (holding that a successor
    can be subject to predecessor’s unpaid MPPAA withdrawal liability so
    long as there exists substantial continuity and notice); Auto. Indus.
    Pension Trust Fund v. S. City Ford, Inc., No. C 11-04590 CW, 
    2012 WL 1232109
    (N.D. Cal. Apr. 12, 2012) (same); Trs. of Utah Carpenters’ &
    Cement Masons’ Pension Trust v. Daw, Inc., No. 2:07-CV-87 TC, 
    2009 WL 77856
    , at *3 (D. Utah Jan. 7, 2009) (same).
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.         27
    V. MICHAEL’S FLOOR COVERING
    above, “substantial continuity” is “the primary question,” and
    so the most important consideration, in assessing whether an
    employer is a successor for purposes of imposing other labor
    law liabilities. 
    Id. Fall River
    Dyeing determined “substantial continuity” by
    examining, inter alia, “whether the business of both
    employers is essentially the same; whether the employees of
    the new company are doing the same jobs in the same
    working conditions under the same supervisors; and whether
    the new entity has the same production process, produces the
    same products, and basically has the same body of
    
    customers.” 482 U.S. at 43
    . This definition of “substantial
    continuity” contains an element Jeffries did not expressly
    enumerate—whether the successor has “basically the same
    body of customers” as the predecessor. 
    Id. But Jeffries
    was
    decided before Fall River Dyeing, and Jeffries’ list of the
    pertinent factors was expressly “not . . . exhaustive.” Jeffries
    
    Lithograph, 752 F.2d at 463
    . In the current context, we
    conclude, the “same body of customers” factor is of special
    significance when determining successorship for purposes of
    withdrawal liability under the MPPAA construction industry
    exception.
    The consideration whether the successor deliberately
    takes over “basically the same body of customers,” Fall River
    
    Dyeing, 482 U.S. at 43
    , dovetails more precisely than any
    other Fall River Dyeing or Jeffries factors with the underlying
    rationale for the construction industry exception to MPPAA
    withdrawal liability—that an employer’s complete
    withdrawal and cessation of work usually does not harm the
    plan because other contributing employers will pick up the
    construction jobs (i.e. the customers) that would have gone to
    28 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    the withdrawing company. If, instead, an employer uses its
    insider knowledge to draw a great many of the predecessor’s
    customers, and so can “pick up where [the predecessor] left
    off,” doing “[t]he same” “type of work” as the predecessor,
    yet neither contributes to the pension plan nor pays
    withdrawal liability, the assumption that animates the
    construction industry exception collapses. Instead, the plan’s
    contribution base is compromised, and the plan’s financial
    stability threatened.     For that reason, focusing the
    successorship inquiry on business retention through
    exploitation of the predecessor’s contacts, public
    presentation, and good will effectuates the purposes of the
    MPPAA construction industry withdrawal provisions.
    It is possible, of course, for a new employer to inherit a
    substantial portion of a prior employer’s customer base
    without making any deliberate attempt to do so. Where that
    is the case, the entrepreneurial interests of putative successor
    employers predominate, just as they do in the NLRA
    successorship context when there is no intention “to take
    advantage of the trained work force of [their] predecessor[s].”
    Fall River 
    Dyeing, 482 U.S. at 41
    . Where, however, the
    objective factors indicate that the new employer “ma[de] a
    conscious decision,” 
    id., to take
    over the predecessor’s
    customer base, the equitable origins of the successor liability
    doctrine support the conclussion that the successor must pay
    withdrawal liability.
    Certain discrete factors, including whether “the new
    employer uses the same plant” and whether “the same
    product is manufactured or the same service [is] offered” are
    pertinent to determining whether the successor has in fact
    actively and successfully captured its predecessor’s market
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.         29
    V. MICHAEL’S FLOOR COVERING
    share. See Jeffries 
    Lithograph, 752 F.2d at 463
    (alterations
    in original). The more closely the successor models itself on
    its predecessor—for example, by taking over its location and
    offering the same services as before—the more likely it will
    succeed in capturing its predecessor’s customers. Where
    putative successors do not similarly rely on insider
    knowledge, similar public presentation, and deliberate
    continuity of business operations to corner their predecessor’s
    market share, it cannot be said that they set out to capture the
    predecessor’s customer base, and the successor doctrine does
    not apply.
    The other Jeffries factors are more relevant to NLRA
    contexts than to the MPPAA withdrawal liability context.
    Although the composition of the workforce is of preeminent
    importance in successorship cases involving, for example, the
    duty to bargain under the NLRA, that factor is not of special
    relevance here. As we explained above, this factor is relevant
    to the duty to bargain because “a mere change of ownership,
    without an essential change in working conditions, is not
    likely to change employees’ attitudes toward union
    representation.” Jeffries 
    Lithograph, 752 F.2d at 463
    . In
    light of the presumption of continued majority support, see
    
    id., it is
    fair to require the successor to bargain with an
    incumbent union if it hires a majority of its workforce from
    its predecessor’s employee base.
    Here, by contrast, whether Michael’s hired a majority of
    its workforce from Studer’s’ employee base is not especially
    informative in determining whether the premises underlying
    withdrawal liability in the construction industry apply. The
    funding base of the Plan is not the particular individuals
    employed, but, rather, the construction projects in the area.
    30 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    See H.C. 
    Elliott, 859 F.2d at 812
    . Given the MPPAA’s
    primary purpose of protecting the plan’s funding base, the
    composition of the workforce factor may well, depending on
    the circumstances, deserve less weight than in the NLRA
    context.
    Finally, whether “the same jobs exist under the same
    working conditions” may be quite informative as to whether
    customers will continue to hire the new contractor. Still, as
    that consideration has a different significance than in the
    NLRA context, the particular job similarities that are relevant
    may differ as well. Again, the focus in the MPPAA context
    must be on whether the successor is threatening the plan’s
    funding base by successfully leveraging factors pertinent to
    obtaining its predecessor’s market share.
    E.
    The district court did not properly identify or weigh the
    successorship factors as applicable to the MPPAA context.
    First, and most significantly, the district court did not
    weigh market share capture as a prime consideration, and so
    did not make any finding as to whether Michael’s had
    retained a significant portion of Studer’s’ business or body of
    customers. Instead, the district court viewed composition of
    the workforce as “perhaps the most crucial” factor.
    The parties disagree about the significance of the number
    of Studer’s customers captured by Michael’s. The Fund
    asserts that the bulk of Michael’s’ revenue in its first quarter
    came from former Studer’s clients, and, further, that by far
    most of Michael’s’ business customers in its first quarter had
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.                31
    V. MICHAEL’S FLOOR COVERING
    been Studer’s’ customers recently. The spotlight, maintains
    the Fund, should be on the relative amount of revenue
    generation by Studer’s’ former customers, rather than on a
    simple head count of all customers, including one-time
    customers. Michael’s responds that only 81 of the 868
    customers Michael’s served in its first two years were former
    Studer’s clients, and that Michael’s ability to attract large
    numbers of individual customers is what matters for the
    successorship determination.
    The Fund’s approach is better aligned with the policies
    underlying the MPPAA withdrawal liability successorship
    analysis than Michael’s. The customer base inquiry is critical
    in this context because it is pertinent to the statutory concern
    with continuity of contribution rates when business changes
    take place. Economically, a simple headcount of the number
    of customers does not synchronize with that concern.
    Instead, a measure of the billings on the jobs worked for
    continuing customers by the old and new companies is more
    useful, as pension fund contributions are usually made based
    on the total employee hours worked. See, e.g., Bd. of Trustees
    of W. Conference of Teamsters Pension Trust Fund v. H.F.
    Johnson, Inc., 
    830 F.2d 1009
    , 1011 (9th Cir. 1987).5
    The district court did find, however, that Michael’s was
    able to retain many of Studer’s’ customers, in large part
    because of its “personal and business relationships” with
    5
    Individual, nonrepeat customers may also reflect a functional
    continuity of the customer base. Word-of-mouth or professional referrals
    of residential customers may recommend a successor business because of
    the transfer of reputation and goodwill. Such factors are also not captured
    by a simple customer headcount, but are likely to be hard to demonstrate
    other than anecdotally.
    32 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    large customers of Studer’s. New Tradition Homes did not
    put out bids to other contractors after Studer’s closed.
    Instead, New Tradition Homes gave its business to Michael’s
    without further inquiry, because New Tradition Homes knew
    Michael’s’ owner, Haasl, from his time as a salesman at
    Studer’s. Michael’s may also have been able to capture other
    Studer’s customers, as the district court recognized, because
    Michael’s “use[d] . . . the same location with the same
    telephone number and a similar looking sign,” while offering
    virtually the same service. As they relate to a focus on
    purposeful takeover of the customer base, these
    considerations are significant, and point toward finding
    Michael’s was a successor. The district court considered
    them, however, only as isolated, independent factors, and so
    did not find them weighty.
    Moreover, by denying the Fund’s motion to supplement
    the record in part because the “customer issue [wa]s not
    dispositive of the successor employer determination,” the
    district court further undermined its consideration of
    customer base continuity. As we have explained, the
    “customer issue” could very well be “dispositive” of the
    successor employer determination. Substantial continuity,
    measured in large part by capture of Studer’s share of the
    construction projects in the area, is a critical factor to
    consider in assessing successorship for purposes of imposing
    MPPAA withdrawal liability. Because the district court’s
    “exercise of discretion [in denying the motion to supplement
    the record was] based on an erroneous interpretation of the
    law,” it cannot stand. Estate of 
    Darulis, 401 F.3d at 1063
    .
    Further, in considering the “continuity of workforce”
    factor, the district court used an erroneous method of
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.          33
    V. MICHAEL’S FLOOR COVERING
    calculation. Its conclusion that there was no “continuity of
    the workforce” between Studer’s and Michael’s rested on a
    determination that “Michael’s did not employ a majority, or
    even a substantial portion of Studer’s workforce.” The
    district court also noted that “the majority of Michael’s
    installation work is performed by independent contractors
    rather than employees,” and concluded that this factor also
    weighed against finding continuity of the workforce.
    The district court made two errors of law in its method of
    determining workforce continuity. First, the appropriate test
    for determining “continuity of the workforce” is whether “a
    majority of the new workforce once worked for the old
    employer,” not whether the successor employs a majority of
    the predecessor’s workforce. Jeffries 
    Lithograph, 752 F.2d at 464
    ; see also Fall River 
    Dyeing, 482 U.S. at 46
    n. 12
    (noting that the NLRB, “with the approval of the Courts of
    Appeals,” has adopted the interpretation that “work force
    continuity . . . turn[s] on whether a majority of the successor’s
    employees were those of the predecessor”); NLRB v.
    Advanced Stretchforming Int’l, Inc., 
    233 F.3d 1176
    , 1180 (9th
    Cir. 2000); Williams Enters., Inc. v. NLRB, 
    956 F.2d 1226
    ,
    1232 (D.C. Cir. 1992). Second, only employees in the
    “bargaining unit,”—that is, the installers actually employed
    by Michael’s who are the individuals as to whom pension
    fund contributions would be due—should be included in the
    workforce continuity test. See Small v. Avanti Health Sys.,
    LLC, 
    661 F.3d 1180
    , 1188 (9th Cir. 2011) (stating, in context
    of duty to bargain, that whether there was continuity of the
    workforce is determined by examining employees within the
    relevant bargaining unit).
    34 RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.
    V. MICHAEL’S FLOOR COVERING
    If it had used the correct metrics, the district court might
    well have found there was workforce continuity here. It
    appears that five of Michael’s eight employee installers had
    previously worked for Studer’s. That some of these
    employees did not “move[] directly from Studer’s to
    Michael’s,” is not dispositive; “a hiatus” between employers
    “is only one factor in the ‘substantial continuity’ calculus.”
    Fall River 
    Dyeing, 428 U.S. at 45
    .
    Finally, the district court also stated that “the successor
    employer determination . . . involv[es] [a finding that the
    successor has] ‘basically the same owners and operators as
    . . . the predecessor employer,’” and that the “changes
    between predecessor and successor were technical in nature
    rather than a substantive change in the management.’”
    (quoting New England 
    Mech., 909 F.2d at 1343
    ). The
    reliance on New England Mechanical for these propositions
    was mistaken. New England Mechanical concerns the
    question whether a successor employer is so similar to its
    predecessor that it is bound by the substantive provisions of
    its predecessor’s collective bargaining agreement with a
    
    union. 909 F.2d at 1343
    . Generally, although a successor
    may have a duty to bargain with an incumbent union,
    successors are not bound by the substantive contractual terms
    of their predecessors’ collective bargaining agreements, to
    which they were not signatories. 
    Id. at 1342;
    see also Fall
    River 
    Dyeing, 482 U.S. at 40
    ; NLRB v. Burns Int’l Sec. Servs.,
    Inc., 
    406 U.S. 272
    , 284 (1972). A successor may be bound
    by the terms of its predecessor’s collective bargaining
    agreement if it has exhibited an intent to be bound, or if it is
    so closely related to the prior business that it is effectively an
    “alter ego” of that business. New England 
    Mech., 909 F.2d at 1342
    .
    RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS.       35
    V. MICHAEL’S FLOOR COVERING
    New England Mechanical thus did not disturb our general
    rule that “[t]he successorship inquiry in [other employment
    and] labor-law context[s] is much broader” than the “strict
    corporate-law sense of [successorship].” 
    Sullivan, 623 F.3d at 781
    . The successorship test in the MPPAA context does
    not require that the changes between Studer’s and Michael’s
    be merely “technical in nature,” nor does it require that both
    entities have “basically the same owners and operators.”
    Instead, the district court must apply the Jeffries/Fall River
    Dyeing successorship factors, with special emphasis on
    substantial continuity as measured by customer retention.
    IV.
    The district court took an erroneously narrow view of the
    successorship inquiry, applied the successorship factors
    acontextually, miscalculated the continuity of the workforce
    factor, and imposed the unwarranted requirement that the
    change of ownership be merely “technical in nature.” We
    therefore reverse and remand for application of the labor and
    employment law successorship factors as appropriately
    weighted for MPPAA construction industry withdrawal
    liability purposes, and to take additional evidence as
    necessary to decide the relevant factual issues.
    REVERSED AND REMANDED.
    

Document Info

Docket Number: 12-17675

Citation Numbers: 801 F.3d 1079, 2015 D.A.R. 10, 60 Employee Benefits Cas. (BNA) 1633, 2015 U.S. App. LEXIS 16160

Judges: Paez, Berzon, Ezra

Filed Date: 9/11/2015

Precedential Status: Precedential

Modified Date: 11/5/2024

Authorities (28)

No. 03-16580 , 401 F.3d 1060 ( 2005 )

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National Labor Relations Board v. Jeffries Lithograph ... , 752 F.2d 459 ( 1985 )

Charles G. Criswell Eugene R. Black v. Delta Air Lines, Inc. , 868 F.2d 1093 ( 1989 )

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new-england-mechanical-inc-dba-independent-plumbing-company-v , 909 F.2d 1339 ( 1990 )

trustees-for-alaska-laborers-construction-industry-health-and-security-fund , 812 F.2d 512 ( 1987 )

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James Miles v. State of California , 320 F.3d 986 ( 2003 )

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OneBeacon Insurance v. Haas Industries, Inc. , 634 F.3d 1092 ( 2011 )

National Labor Relations Board v. Burns International ... , 92 S. Ct. 1571 ( 1972 )

Central States, Southeast & Southwest Areas Pension Fund v. ... , 789 F. Supp. 1430 ( 1992 )

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