Resilient Floor Covering Pension Trust Fund Board of Trustees v. Michael's Floor Covering, Inc.

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.
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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.
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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.
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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
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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.”
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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).
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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
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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—
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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
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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
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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
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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.