Greater KS City v. Superior General

____________
Nos. 95-3128/3176
____________
Greater Kansas City Laborers *
Pension Fund, a Trust Fund; *
Greater Kansas City Laborers *
Welfare Fund, a Trust Fund; *
Greater Kansas City Laborers *
Vacation Plan, a Trust Fund; *
Greater Kansas City Laborers *
Training Fund, a Trust Fund, *
*
Appellants/Cross-appellees,*
*
John Rider; Jeffrey Chaikin, *
parties immediately above acting*
as Trustees of the Greater *
Kansas City Laborers Pension *
Fund, Greater Kansas City * Appeal and Cross-Appeal from the
Laborers Welfare Fund, Greater * United States District Court for
Kansas City Laborers Vacation * the Western District of Missouri
Plan and Greater Kansas City *
Laborers Training Fund; *
Charles Jones; Charles Mackey, *
*
Appellants, *
*
v. *
*
Superior General Contractors, *
Inc.; Bohnert Construction *
Company, *
*
Appellees/Cross-appellants.*
____________
Submitted: March 11, 1996
Filed: January 15, 1997
____________
Before McMILLIAN, BEAM and HANSEN, Circuit Judges.
____________
McMILLIAN, Circuit Judge.
Four employee trust funds -- the Greater Kansas City Laborers Pension
Fund, the Greater Kansas City Laborers Welfare Fund, the Greater Kansas
City Laborers Vacation Fund, and the Greater Kansas City Laborers Training
Fund (collectively plaintiffs or the Funds) -- appeal from a final order
entered in the United States District Court1 for the Western District of
Missouri holding that defendants Bohnert Construction Company, Inc. (New
Bohnert), and Superior General Contractors, Inc. (Superior General),2 were
not liable to the Funds under §§ 502(g)(2) and 515 of the Employee
Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1132(g), 1145, for
employee fringe benefit contributions allegedly due between July 1, 1992
and March 31, 1994. Greater Kansas City Laborers Pension Fund v. Superior
General Contractors, Inc., No. 94-0374-CV-W-1 (W.D. Mo. July 21, 1995)
(Findings of Fact & Conclusions of Law). For reversal, the Funds argue the
district court erred in (1) holding that New Bohnert was not the alter ego
of Superior General, (2) failing to consider certain documentary evidence
submitted by the Funds, and (3) admitting into evidence an NLRB charge and
decision addressing whether alter ego status should apply to defendants.
In addition, defendants argue on cross-appeal that the district court erred
in holding that it had jurisdiction over the present action under §§ 502(g)
and 515 of ERISA, 29 U.S.C. §§ 1132(g), 1145. For the reasons discussed
below, we affirm the order of the district court.
I. Background
The Funds are employee trust funds established between 1962 and 1974
pursuant to the collective bargaining agreement entered into between the
Builders Association of Missouri and various
1
The Honorable Dean Whipple, District Judge, United States
District Court for the Western District of Missouri.
2
New Bohnert and Superior General are collectively referred to
as “defendants.”
-2-
affiliates of the Laborers International Union of North America in Kansas
City, Missouri.3 The Funds were established under § 302 of the Labor
Management Relations Act, 29 U.S.C. § 186. In addition, they are employee
benefit plans governed by § 3 of ERISA, 29 U.S.C. § 1002.
New Bohnert is a Missouri corporation in the business of construction
in Missouri and Kansas. It was incorporated in 1991, when the construction
company originally founded in 1979 by Al Bohnert, Bohnert Construction Co.
(Old Bohnert), changed its name to Bohnert CC, Inc., and transferred its
general contracting work to New Bohnert.4
In 1981 and 1982, Charlie Morgan, Terry Tackett, and Stan Minor
joined Old Bohnert. At that time, Old Bohnert provided several types of
services: general contracting, foundation work, interior work, and
refrigeration. According to defendants’ theory of the case, Al Bohnert
decided several years later to assist Morgan, Tackett, and Minor in
starting their own company. Thus, in 1988, Al Bohnert helped them
establish Superior General. Superior General was incorporated in late
1988. Although Al Bohnert was the majority shareholder in Superior
General, Morgan served as president of the company, made all decisions
concerning the daily operations, and directed Superior General’s labor
relations. In 1989, Tackett became a vice-president of Superior General.
At approximately the same time, Minor decided to sell his interest in
Superior General to Morgan and Tackett. Thereafter, Morgan and Tackett
operated Superior General.
3
The collective bargaining agreement establishing the Funds
was amended and revised effective January 1, 1976.
4
Bohnert Construction Co., Inc., incorporated in 1991, does
not use the name “New Bohnert,” nor did the original company refer
to itself as “Old Bohnert.” We use these terms for purposes of
clarification, however, because the relationship between New
Bohnert and Superior General is at issue in the present case.
-3-
On January 1, 1989, Superior General signed a contract stipulation
to be bound by the collective bargaining agreement between the Builders
Association and the Union. This collective bargaining agreement contained
an “evergreen clause,” meaning that the terms of agreement would be
automatically renewed unless either party provided written notice of
termination to the other within a specified time period. Between 1988 and
November 1992, when it ceased operations, Superior General employed
laborers performing work covered by the collective bargaining agreement.
This agreement provided that Superior General would make fringe benefit
contributions to the Funds for the laborers it employed.
In March 1991, Al Bohnert incorporated another construction business,
New Bohnert. At the same time, the original company (Old Bohnert) changed
its name to Bohnert CC, Inc., and transferred all of its general
contracting business to New Bohnert. Defendants maintain that New Bohnert
was created because Al Bohnert wanted Kelsey Goss, one of his employees,
to acquire an ownership interest in the general contracting business. Goss
became a shareholder of New Bohnert at its inception. After New Bohnert
was created, Old Bohnert performed only interior finishing work and
accounting services.
Throughout its existence, Superior General had operated from its own
premises, which were initially leased from Old Bohnert. As business grew,
Superior General leased additional property from other companies. In
addition, Superior General also used the accounting department of Old
Bohnert for its routine accounting functions. Between 1988 and 1991,
Superior General made a single monthly payment for these accounting
services. In 1992, however, Superior General and New Bohnert began a
“proportionate assessment” system in which Stan Minor had the discretion
to distribute the cost of the accounting services between New Bohnert and
Superior General based upon his assessment of the use each company had made
-4-
of Old Bohnert’s accounting department during a particular time period.
Superior General did a substantial amount of business with Old
Bohnert, and later, New Bohnert, through a competitive bid process. These
arrangements were negotiated between Charlie Morgan and Terry Tackett on
behalf of Superior General and the project managers for Old Bohnert and New
Bohnert. Superior General also performed subcontracting work for other
entities.
In 1992, Superior General began to lose money and, by mid-1992, had
experienced severe financial losses. In August 1992, Charlie Morgan
resigned from Superior General. Terry Tackett remained at Superior General
to wind up its outstanding projects. Superior General ceased operations
on November 30, 1992, and therefore employed no laborers after that date.
The present litigation arose when the Funds’ trustees instituted suit
in federal district court against Superior General and New Bohnert, under
§§ 502(g)(2) and 515 of ERISA, 29 U.S.C. §§ 1132(g), 1145, seeking fringe
benefit contributions due under two collective bargaining agreements to
which Superior General was a signatory employer. The first collective
bargaining agreement ran from June 1, 1990, to March 21, 1993; the second
ran from April 26, 1993, through March 31, 1996. The Funds alleged that
New Bohnert was an alter ego of Superior General, and that New Bohnert and
Superior General should be held jointly and severally liable to the Funds
for any contributions due. Following a bench trial, the district court
determined that (1) Superior General had made all the contributions it was
legally obligated to make before it ceased operations5 and (2) New Bohnert
was neither a signatory to the
5
Specifically, the district court found that Superior General
had “made all required fringe benefit contributions to the
Plaintiff Funds between January 1, 1989, through its cessation of
operations on November 30, 1992." Slip op. at 7.
-5-
collective bargaining agreements nor an alter ego of Superior General.
Slip op. at 7, 9.
The district court relied on the factors presented in Iowa Express
Distribution, Inc. v. NLRB, 739 F.2d 1305, 1310 (8th Cir. 1984) (Iowa
Express), cert. denied, 469 U.S. 1088 (1984), and Crest Tankers, Inc. v.
National Maritime Union, 796 F.2d 234, 237 (8th Cir. 1986) (Crest Tankers),
to determine whether a successor employer which has not signed a labor
contract is nevertheless bound by its terms as an “alter ego” of a
signatory employer. The district court found that Superior General and New
Bohnert were not alter egos because the two companies did not share
substantially identical ownership, management, supervision, business
purposes, operation, customers, or equipment. Slip op. at 9. The district
court specifically found that (1) control and management of Superior
General and New Bohnert were distinct and separate, because, although Al
Bohnert was the majority shareholder in Superior General, he played no role
in its operations; (2) the arrangement by which Superior General utilized
the accounting department of Old Bohnert was negotiated in an arm’s length
transaction; (3) separate books were kept for Superior General and New
Bohnert which clearly showed their separate operations and employees; and
(4) although Superior General and New Bohnert did a substantial volume of
business with one another, such arrangements were negotiated in arm’s
length transactions, through a competitive bidding process. Id. at 4-6.
Finally, noting that “[g]enerally, an alter ego finding requires the
existence of an unlawful motive or intent to avoid the terms of the
collective bargaining agreement,” the district court found that the closing
of Superior General and the creation of New Bohnert was not accompanied by
anti-union animus. Id. at 9 (quoting Iowa Express, 739 F.2d at 1310-11),
7.
The Funds then filed this timely appeal. In addition, Superior
General and New Bohnert filed cross-appeals, arguing that
-6-
the district court lacked jurisdiction under §§ 502(g) and 515 of ERISA,
29 U.S.C. §§ 1132(g), 1145, to hear the present case because it falls
within the exclusive jurisdiction of the National Labor Relations Board.
II. Discussion
A. Alter Ego Analysis
For reversal, the Funds first argue the district court applied an
incorrect legal standard in concluding that New Bohnert was not the alter
ego of Superior General and was therefore not liable for any contributions
to the Funds. Specifically, the Funds contend that the district court
placed undue weight on its finding that anti-union animus did not motivate
the closing of Superior General and the creation of New Bohnert. The Funds
argue that “the mere existence of ‘some legitimate business reason’ for a
change in corporate organization should not alone prevent a finding of
alter ego status." Crest Tankers, 796 F.2d at 238 n.2 (quoting NLRB v.
Allcoast Transfer, Inc., 780 F.2d 576, 581 (6th Cir. 1986)). The Funds
contend that the district court’s finding of no anti-union animus does not
preclude a determination that Superior General and New Bohnert operated as
alter egos.
Defendants argue that the district court’s alter ego analysis did not
place undue weight on the absence of unlawful motivation. Defendants argue
that the district court made specific factual findings rejecting every
element of the alter ego analysis. They further maintain that these
factual findings are not clearly erroneous and should therefore be upheld
on appeal.
Determination of alter ego status involves a mixed question of law
and fact. We therefore review the district court’s findings of fact for
clear error and its conclusions of law de novo. See, e.g., Cooper Tire &
Rubber Co. v. St. Paul Fire & Marine Insurance
-7-
Co., 48 F.3d 365, 369 (8th Cir.), cert. denied, 116 S. Ct. 300 (1995).
The parties and the district court may have mistaken the applicable
law. The factors set forth in Iowa Express and Crest Tankers for
determining alter ego status under labor law do not control the question
of Superior General's and New Bohnert’s corporate relationship, if any,
because the present action arises under §§ 502(g) and 515 of ERISA, 29
U.S.C. §§ 1132(g), 1145. We have previously applied corporate law
principles to determine employer liability under ERISA, where such
principles comport with the language and purposes of the statute. See Pipe
Fitters Health & Welfare Trust v. Waldo, R., Inc., 969 F.2d 718, 720-21
(8th Cir. 1992), cert. denied, 506 U.S. 1054 (1993); Rockney v. Blohorn,
877 F.2d 637, 642-43 (8th Cir. 1989).6 The alter ego doctrine as developed
under the National Labor Relations Act (NLRA), 29 U.S.C. § 151 et seq.,
involves a more lenient standard for disregarding the corporate form than
that employed in corporate law. The focus of the labor law alter ego
doctrine “is on the existence of a disguised continuance of a former
business entity or an attempt to avoid the obligations of a collective
bargaining agreement.” Iowa Express, 739 F.2d at 1310-11 (quoting Penntech
Papers, Inc. v. NLRB, 706 F.2d 18, 24 (1st Cir.), cert. denied, 464 U.S.
892 (1983)). By contrast, the alter ego doctrine as developed under
corporate law provides that the legal fiction of the separate corporate
entity may be rejected in the case of a corporation that (1) is controlled
by another to the extent that it has independent existence in form only and
(2) is used as a subterfuge to defeat
6
We note, however, that a plaintiff may not attempt to pierce
the corporate veil to enforce an ERISA judgment against an
individual not liable for the underlying ERISA violation. Peacock
v. Thomas, 116 S. Ct. 862, 865-66 (1996). The Supreme Court has
held that such an action constitutes an improper attempt to use
ancillary jurisdiction “to impose an obligation to pay an existing
federal judgment on a person not already liable for that judgment.”
Id.
-8-
public convenience, to justify wrong, or to perpetuate a fraud. See In re
B.J. McAdams, Inc., 66 F.3d 931, 937 (8th Cir. 1995) (McAdams), cert.
denied, 116 S. Ct. 2546 (1996); Lakota Girl Scout Council, Inc. v. Havey
Fund-Raising Management, Inc., 519 F.2d 634, 638 (8th Cir. 1975) (Lakota).
Thus, control by one company over its alleged alter ego is necessary under
the corporate law standard. See McAdams, 66 F.3d at 937; see also Pepper
v. Litton, 308 U.S. 295, 306-07 (1939) ("The essence of the [corporate law
alter ego] test is whether or not under all the circumstances the
transaction carries the earmarks of an arm’s length bargain. If it does
not, equity will set it aside.") (footnote omitted).
Although the underlying congressional policy behind ERISA favors the
disregard of the corporate entity in situations where employees are denied
their pension benefits, such policy interests are not implicated in the
present case, which does not involve an individual pensioner’s claim for
benefits; rather, it involves a pension fund’s attempt to collect unpaid
contributions. See Central States, Southeast & Southwest Areas Pension
Fund v. Central Transport, Inc., 85 F.3d 1282, 1288 (7th Cir. 1996).
Moreover, even if such interests were at stake in the present case, we
believe the corporate law standard for determining alter ego status strikes
an appropriate balance between the congressional intent of ERISA and the
long-established principle that a corporation’s existence is presumed to
be separate and may be disregarded only under narrowly prescribed
circumstances. See Lakota, 519 F.2d at 638.
Applying the corporate law standard of alter ego status to the facts
of the present case, we hold that New Bohnert was not an alter ego of
Superior General. Our review of the record indicates that the factual
findings of the district court were not clearly erroneous. As noted above,
the district court found that control and management of Superior General
and New Bohnert were distinct and separate and that transactions between
the two companies were
-9-
negotiated at arm’s length. See slip op. at 4-6. When examined de novo
under the two-part corporate law test set forth in McAdams for determining
alter ego status, these facts lead us to conclude that New Bohnert was
neither controlled by Superior General “to the extent that it has
independent existence in form only” nor “used as a subterfuge to defeat
public convenience, to justify wrong, or to perpetuate a fraud.” See
McAdams, 66 F.3d at 937. We therefore hold that New Bohnert is not liable
as an alter ego of Superior General for fringe benefit contributions to the
Funds.7
B. Documentary Evidence
The Funds next argue that the district court erred in failing to
consider certain documentary evidence submitted by the Funds in support of
their contention that New Bohnert is an alter ego of Superior General.
They argue that the district court placed exclusive weight on testimony by
Al Bohnert and Charles Morgan that the two companies were operated
separately and erroneously failed to consider contradictory documentary
evidence. Yet the Funds do
7
As an alternative basis for holding New Bohnert liable for
unpaid fringe benefit contributions, the Funds argue that Superior
General and New Bohnert constituted a single employer. In Iowa
Express Distrib., Inc. v. NLRB, 739 F.2d 1305, 1310 (8th Cir.),
cert. denied, 469 U.S. 1088 (1984), we explained that “[t]he single
employer doctrine is a [National Labor Relations] Board creation
that treats two or more related enterprises as a single employer
for purposes of holding the enterprises jointly to a single
bargaining obligation or for the purpose of considering liability
for any unfair labor practices.” Factors to be considered in
determining whether two distinct business entities are to be deemed
a single employer for purposes of the National Labor Relations Act
include: (1) interrelation of operations, (2) common management,
(3) centralized control of labor relations, and (4) common
ownership or financial control. Id.; see also Crest Tankers, Inc.
v. National Maritime Union, 796 F.2d 234, 237 (8th Cir. 1986)
(describing factors relevant to single employer analysis). The
single employer doctrine is not relevant to the present case,
however, because we hold that corporate law principles govern the
assessment of the corporate relationship, if any, between New
Bohnert and Superior General.
-10-
not specify in their briefs which documents were allegedly disregarded by
the district court. Rather, they argue that had the district court
considered the documentary evidence, it would have found that the requisite
common control and ownership existed between New Bohnert and Superior
General.
Defendants respond, and we agree, that the Funds are essentially
challenging the factual findings of the district court, which may not be
set aside unless clearly erroneous. A factual finding is clearly erroneous
if the reviewing court is left with a definite and firm conviction that a
mistake has been committed. In re Sherman, 67 F.3d 1348, 1353 (8th Cir.
1995). We cannot say that the district court's findings of fact are
clearly erroneous. The district court was not required to “make specific
findings with respect to all of the evidence presented, nor even refer to
all the evidence introduced.” Griffin v. City of Omaha, 785 F.2d 620, 628
(8th Cir. 1986). We note, however, that the district court did refer to
several pieces of documentary evidence in its memorandum opinion, including
a sublease, an accounting agreement, and the corporate books of Superior
General and New Bohnert. Slip op. at 4-8. The district court's reliance
on the credibility of witness testimony in reaching its conclusions does
not constitute a basis for setting aside its factual findings. See Stevens
v. McHan, 3 F.3d 1204, 1206 (8th Cir. 1993) (findings supported by the
record but based primarily on a trial judge’s decision on the credibility
of the witnesses can “`virtually never be clear error'”) (quoting Anderson
v. City of Bessemer City, 470 U.S. 564, 575 (1985)); see also In re Central
Arkansas Broadcasting Co., 68 F.3d 213, 215 (8th Cir. 1995) (per curiam)
(“Where there is more than one permissible view of the evidence, we may not
hold that the choice made by the trier of fact was clearly erroneous.”).
-11-
C. Admissibility of NLRB Charge and Decision
Finally, the Funds argue that the district court abused its
discretion in admitting into evidence a 1993 unfair labor practice charge
filed against defendants and a decision by the Board not to prosecute this
charge. In the unfair labor practice charge, the local unions which had
executed the collective bargaining agreement with Superior General alleged
that Superior General had repudiated the collective bargaining agreement
in violation of § 8(b)(1), (3), and (5) of the NLRA, 29 U.S.C. § 158(b)(1),
(3), and (5). App. at 45-46. As in the present case, the liability of New
Bohnert was premised upon an alter ego theory. The Board decided not to
prosecute the charge after determining that New Bohnert was not an alter
ego of Superior General. Id. at 46. Noting that the district court had
previously ruled that the Board decision could not collaterally estop a
finding of alter ego liability in the present action, the Funds argue that
the unfair labor practice charge and Board decision were irrelevant to the
alter ego issue and therefore inadmissible at trial.
In light of our above holding that the labor law standard for
determining alter ego status does not control the present case, we agree
that the unfair labor practice charge and the Board decision were
irrelevant to the question whether New Bohnert was liable to the Funds
under ERISA as an alter ego of Superior General. However, in bench trials,
the admission of incompetent or irrelevant evidence is not a ground for
reversal “when there is sufficient competent evidence to support the
judgment and it does not appear that the court was induced by . . . [that]
evidence to make essential findings that it otherwise would not have made.”
O’Connor v. Peru State College, 781 F.2d 632, 639 (8th Cir. 1986); see also
Harris v. Rivera, 454 U.S. 339, 346 (1981) (“In bench trials, judges
routinely hear inadmissible evidence that they are presumed to ignore when
making decisions.”). In the present case, the factual findings of the
district court are supported by
-12-
sufficient evidence in the record. Nor was the district court induced by
the evidence to make essential findings that it otherwise would not have
made. Thus, admission of this irrelevant evidence was harmless error.
D. Cross-Appeal
New Bohnert and Superior General argue on cross-appeal that the
district court erred in determining that it had jurisdiction under §§
502(g) and 515 of ERISA, 29 U.S.C. §§ 1132(g), 1145, over the present
action. Citing Laborers Health & Welfare Trust Fund v. Advanced
Lightweight Concrete Co., 484 U.S. 539, 545-53 (1988) (Advanced
Lightweight), defendants contend that the remedy provided in §§ 502(g) and
515 of ERISA, 29 U.S.C. §§ 1132, 1145, does not confer jurisdiction on
federal district courts to determine whether an employer’s unilateral
decision to refuse to make postcontract contributions violates the NLRA,
29 U.S.C. § 151 et seq. In Advanced Lightweight, the defendant company was
a party to two multi-employer collective bargaining agreements that
required monthly contributions to eight employee benefit plans. The
company made the requisite contributions until the expiration date of the
multi-employer agreements but made no contributions thereafter. 484 U.S.
at 541-42. The plans’ trustees sued the company in federal district court,
alleging that the company's unilateral decision to discontinue making its
contributions constituted a breach of its duty to bargain in good faith in
violation of § 8(a)(5) of the NLRA, 29 U.S.C. § 158(a)(5). 484 U.S. at
541-42. The complaints alleged that the federal court had jurisdiction
under § 515 of ERISA, 29 U.S.C. § 1145. The Supreme Court, affirming the
judgment of the court of appeals, held in favor of the company on the
ground that an employer’s liability under § 515 of ERISA, 29 U.S.C. § 1145,
was limited to the effective period of the collective bargaining agreement
and that the section does not confer federal jurisdiction to determine
whether an employer’s refusal to make postcontract contributions violates
the NLRA. 484
-13-
U.S. at 549. The Court reasoned that the text and legislative history of
§§ 502(g) and 515 of ERISA, 29 U.S.C. §§ 1132(g), 1145, described the
employer’s contractual obligation to make contributions but omitted any
reference to the noncontractual obligation imposed by the NLRA. 484 U.S.
at 545-49.
Defendants argue that Advanced Lightweight controls the present case
and that the district court therefore lacked jurisdiction under §§ 502(g)
and 515 of ERISA, 29 U.S.C. §§ 1132(g), 1145, to entertain the action
brought by the Funds, because it fell within the exclusive jurisdiction of
the NLRB. Defendants maintain that the present case, like Advanced
Lightweight, involves conduct alleged to constitute a violation of the
NLRA, because the Funds claimed that New Bohnert was liable under the labor
law standard for alter ego status for unpaid contributions and New Bohnert
raised the defense of repudiation of the collective bargaining agreement.8
We hold that the district court had jurisdiction under §§ 502(g) and
515 of ERISA, 29 U.S.C. §§ 1132(g), 1145, over the present case.
Defendants’ reliance on Advanced Lightweight is misplaced, because the
Funds, unlike the plaintiff trustees in Advanced Lightweight, did not claim
that defendants’ failure to make fringe benefit contributions constituted
an unfair labor practice. Moreover, defendants’ jurisdictional argument
also fails in light of our above holding that the labor law standard for
alter ego status does not govern the alter ego liability of a defendant
corporation in a suit brought under §§ 502(g) and 515 of ERISA, 29 U.S.C.
§§ 1132(g), 1145, seeking fringe benefit contributions.
8
The district court did not consider New Bohnert’s repudiation
defense in determining that New Bohnert and Superior General were
not liable for fringe benefit contributions. See slip op. at 8-10.
-14-
Nor does the present case fall within the jurisdiction of the NLRB
because New Bohnert raised the defense of repudiation of the collective
bargaining agreement. Defendants’ argument is foreclosed by the well-
established principle that an action does not arise under federal law
through the assertion of a defense. See Franchise Tax Bd. v. Construction
Laborers Vacation Trust, 463 U.S. 1, 9-12 (1983).
III. Conclusion
We hold that the district court did not err in holding that New
Bohnert was not liable as an alter ego of Superior General for fringe
benefit contributions allegedly owed to the Funds under ERISA. We further
hold that the district court had jurisdiction over the present action under
§§ 502(g) and 515 of ERISA, 29 U.S.C. §§ 1132(g), 1145. Accordingly, the
order of the district court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
-15-