D & D NAPA, Inc. v. Unemployment Insurance Appeals of the Indiana Department of Workforce Development

Sep 21 2015, 9:27 am
ATTORNEY FOR APPELLANT
Zachary J. Eichel
Einterz & Einterz
Zionsville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
D & D NAPA, Inc., September 21, 2015
Appellant, Court of Appeals Case No.
93A02-1501-EX-58
v. Appeal from the Department of
Workforce Development
Unemployment Insurance Unemployment Insurance
Appeals of the Indiana Appeals
Department of Workforce The Honorable Aija Funderburk,
Development, Liability Administrative Law
Judge
Appellee.
Case No. 58171
Brown, Judge.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 1 of 23
[1] D & D NAPA, Inc. (D & D Metal Products, Inc.) (“D & D”)1 appeals a
decision of the Liability Administrative Law Judge (the “ALJ”) concluding that
it was a partial successor of Chaffins Enterprises, Inc. (“Chaffins”) for the
purpose of calculating its unemployment benefit contributions. D & D raises
one issue, which we revise and restate as whether the ALJ erred as a matter of
law in its conclusion. We affirm.
Facts and Procedural History
[2] D & D sells automotive parts supplied by NAPA Auto Parts and operates
sixteen stores in Illinois and Indiana. In May 2010, D & D purchased certain
property from Chaffins for approximately $38,077.29. According to the bill of
sale, D & D purchased “[a]ll currently classified stock-in-trade, merchandise
and inventories of [Chaffins’s] store, totaling [$20,798.292] or the value as
physically inventoried prior to the closing” and “[t]he furniture, fixtures, and
1
At the October 14, 2014 hearing, Roger Dittrich indicated he was the president of D & D and that the
company changed its name from D & D Metal Products, Inc., to D & D NAPA, Inc.
2
The bill of sale initially showed an amount of $75,000, but the amount was struck and the handwritten
amount of $20,798.29 was inserted. Dittrich, the president of D & D, testified that the initial amount was
based on information he was given regarding the inventory level, that at the time of purchase a physical
inventory was completed and the actual number was $20,798.29, and that a person with NAPA’s corporate
office inserted the handwritten figures on the bill of sale.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 2 of 23
miscellaneous equipment used in [Chaffins’s] store . . . totaling [$17,2793].”
Exhibits at 90.
[3] In February 2013, Chaffins filed a Report of Inactivation with the Indiana
Department of Workforce Development (the “DWD”) stating that it had
discontinued operations and that the date of its last payroll was on September
30, 2011. In March 2013, Chaffins filed the completed form “Report of
Transfer – Complete Sale” with the DWD. Exhibits at 53. In the area to
specify the reason for filing the form, the box next to “Other” was marked, and
the explanation stated “lease of building” and “purchase of retail business.”4 Id.
Chaffins indicated that the effective date of the change and the date its
operations ceased was April 23, 2010, and that the date of its last payroll was
April 24, 2010.
[4] On July 5, 2013, the DWD issued a notice that it made a determination that
there had been a complete disposition to acquirer as of December 31, 2010.5
3
The bill of sale initially showed an amount of $16,509, but the amount was struck and the handwritten
amount of $17,279 was inserted.
4
In addition to “Other,” the options included, among others, “Sale of Complete organization” and
“Partnership change (50% or more).” Exhibits at 53.
5
The DWD presented testimony that Chaffins submitted a contribution report indicating it had “payroll, one
employee on the twelfth of the month through the fourth quarter of 2010,” that the DWD had “a lot of dates
being used by Chaffins and no [] tangible information received from [D & D],” and that the DWD could not
hold that the disposition occurred any earlier than December 31, 2010 “because the employer told [it] that
through the twelfth day of December 2010 at a minimum they had one employee working.” Transcript at 57.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 3 of 23
The DWD recalculated D & D’s employer rate to reflect the acquisition of
Chaffins, resulting in a rate increase for D & D for 2012.
[5] On September 10, 2013, the DWD sent notice and demand statements to D &
D for each of the four quarters in 2012.6 Specialized Accounting Services LLC
(“SAS”), on behalf of D & D, sent a letter dated September 13, 2013, to the
DWD stating: “Although [Chaffins] ceased its operations and is closed, [D &
D] did NOT acquire this business. D & D simply purchased the assets of the
business and hired the employees.” Id. at 59. SAS sent a letter dated October
15, 2013, to DWD stating that D & D did not purchase Chaffins and that it
“merely purchased the remaining assets after it was closed (the assets were
$200k) and did not even hire any of the prior employees.” Id. at 70. The letter
also stated that D & D had acquired the assets and employees of another
company in 2012, that the company had a much better experience rating with
the State, and that it was expected that the information would help lower D &
D’s rate for 2013.
[6] On October 14, 2014, a hearing was held before the ALJ at which the parties
appeared by counsel and presented testimony and evidence. The DWD
presented the testimony of Jennifer Chappell, Director of U.I. Tax
Administration for DWD, and Mary Lisa Bickley and Dawn Bottoms, audit
examiners for DWD, and D & D presented the testimony of Roger Dittrich,
6
The sum of the amounts due on the four statements is $6,391.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 4 of 23
President of D & D. The ALJ admitted documentary evidence which included
the report of transfer, records of telephone inquiries, employee wage detail
reports, correspondence from SAS, the notice and demand statements, printouts
of employer rate detail screens, experience balance reconciliation worksheets,
and the bill of sale. According to a record of telephone inquiry dated
September 13, 2013, an agent for D & D called DWD, confirmed that the
company had purchased two stores in 2010, and asked why the company’s rate
had increased significantly “just for taking on maybe 30” employees, and the
DWD representative explained the timing of the acquisition and that D & D’s
rate had been recalculated and blended with the disposer’s rate. Id. at 56.
[7] Bickley testified that she processed the acquisition involving D & D based on
the report of transfer and that she had spoken with Katherine Chaffins of
Chaffins regarding the acquisition. Bickley testified that Chaffins had been
doing business as NAPA North Judson and had an address on Talmer Avenue,
that D & D was also an auto parts store with the same address on Talmer
Avenue, and that D & D used the same telephone numbers used by Chaffins.
[8] Bottoms testified that she reviewed wage detail reports and found that two
employees who had worked for Chaffins, Kenneth Reed and Brad Chaffins,
later worked for D & D. Bottoms testified there was a gap in employment of
the employees and that, even where there is a gap between when employees
stop working for a disposer and start with an acquirer, the transfer of the
employees could indicate that there was a transfer of business. She stated that
the DWD looks at employee movement once it receives notification there has
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 5 of 23
been a sale, and that a lot of businesses will tell the DWD that the employees
were let go and after that the other entity interviewed and rehired them, but that
was still considered a transfer of an employee.
[9] Chappell testified that one of her responsibilities, when an employer protests a
determination of successorship, is to review the records and make a judgment
call regarding whether the agency’s determination was correct based on the best
information available under the statute. She testified that D & D did not
dispute that there was a transfer of assets and that it had hired employees of
Chaffins, that D & D purchased those assets and hired the employees “to
operate the same business in the same location under the same DBA that the
former entity had used,” that “both of these are considered Napa,” that
Chaffins used “Napa North Judson Roger’s Precision Auto Supply,” and that
D & D “is Napa North Judson.” Transcript at 34. She stated that Chaffins
reported that it completely ceased its operation, and that she checks the internet
to “see whether or not you can get from one business, the old business to the
new business seamlessly. So that there is an appearance of continuation for
what’s offered to the public.” Id.
[10] Chappell further testified that an acquisition may or may not have an impact on
the acquiring company and that a company may acquire a business with a
lower experience balance, a higher experience balance, or the same experience
balance. She stated the notice and demand statements are based on an
employer’s own reporting of their taxable wages multiplied by the merit rate
notice issued by the DWD, that the purchase of remaining assets after a
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 6 of 23
business closes can affect the DWD’s determination in certain circumstances,
including the nature and length of time of closure and other factors, and that the
DWD looks at public records and determines, for intent and purpose, whether
the new entity is a different business or essentially a continuation of all or part
of the pre-existing business. She testified that in this case Chaffins stated it was
in operation at the time of the acquisition, that D & D leased the building that
Chaffins was in and took over its operations, and that in searching online for
Roger’s Precision Auto Supply she was directed to NAPA at North Judson
which appeared to be the business being operated by D & D.
[11] Additionally, Chappell testified that she could not “find anything in any of the
filings or in the public record that shows that the business, which used [to] be
Chaffins [], Napa North Judson, Roger’s Precision Auto Supply, is not in
actuality functioning under that same identity at this time with or without the
same employee. If the identity continues, the business continues, there’s a
continuation of trade or business, the statute is satisfied. There should be a
successorship by the agency and the experience balance should follow the
business from one owner to the other owner.” Id. at 47. Chappell also testified
that the determination of successorship is not predicated on a transfer of the
workforce and that the determination is whether the business trade or
organization was continued in part or in whole and whether it is essentially the
same business being operated regardless of whether it was operated with the
same employees. She noted that the DWD used the case of Indianapolis
Concrete, Inc. v. Unemployment Ins. Appeals of Indiana Dep’t of Workforce Dev., 900
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 7 of 23
N.E.2d 48 (Ind. Ct. App. 2009), in training its audit examiners, and stated that
“everything I looked at showed that the business operated seamlessly between
these two [entities]. That is a Napa location before. It was a Napa location
after, and it never ceased to be a Napa location.” Id. at 69.
[12] Dittrich testified that he was the president of D & D, he had personal
knowledge that the amounts on the bill of sale were accurate for the value of the
inventory of Chaffins, and that he did not purchase any right to hire employees
or use a phone number through the bill of sale. He testified that D & D hired
employees who were formerly employed by Chaffins and, when asked how he
came to hire those employees, that the company had applications that anybody
who wished could complete. He stated that he purchased the inventory of
NAPA North Judson and that he then leased the building on Talmer Avenue
from the Chaffins family. When asked if there were any other businesses
operating on the property, Dittrich testified: “Yes, Roger’s Precision Auto
Supply, which was a rebuilding shop or a [] service center for rebuilding motors,
[] those types of things.” Id. at 75. He indicated he did not purchase a
corporate name, any covenant not to compete, any goodwill, any patent rights,
any accounts receivable, or any books and accounts from Chaffins.
[13] Dittrich was asked the business of D & D NAPA, Inc., and D & D Metal
Products, Inc., and he replied that each were in the business of selling auto
parts. When asked the business activity of Chaffins, Dittrich testified that it
“did engine repairs in their Roger’s Precision Auto in the back” and “had a very
small parts store up in the front, and his, most of his business was rebuilding
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 8 of 23
motors.” Id. at 76. Dittrich was asked “[s]o the auto part store in the front, was
that, is that the Napa North Judson,” and Dittrich testified “Yes. You can’t
operate a store with $20,000 of inventory” and that “[y]ou wouldn’t have
customers.” Id. He testified Chaffins was “running an engine rebuilding center
there” and “had blades and different things to rebuild motors” and that “[t]his
was just like a little counter in the front of there . . . .” Id. He stated that he
thought the business was still at that location even though D & D had moved.
When asked if D & D “had the business name Napa North Judson,” Dittrich
replied “we answer the phone Napa North Judson.” Id. at 77. When asked the
reason, Dittrich testified that there are six thousand NAPA dealers, and that
“what happens is, Napa, when they have a customer that’s not doing well or is
gonna close, they go out and find somebody to kept [sic] that territory open”
and “[s]o they came to me said look we have this opportunity in North Judson
we’d like you to look at.” Id. Dittrich testified D & D was not a franchisee but
that it bought NAPA parts, that it used the NAPA name, and that it sold only
auto parts and only NAPA auto parts. When asked if he had another location
besides the North Judson location, Dittrich testified “[w]e have eleven in
Illinois and five in Indiana” and that they were all NAPA stores. Id. at 78.
[14] On cross-examination, when asked if D & D had purchased furniture and
fixtures from Chaffins, Dittrich testified: “(inaudible) where you purchase the
racking that the stuff sits on, the counter, the computers. That would be what
we considered that $17,000 number. The gondulas [sic] in the front of the store
where you put your oil and your car wash stuff.” Id. at 79. When asked about
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 9 of 23
the October 15, 2013 letter referencing that $200,000 of assets were purchased,
he said “[t]hat’s because of the amount of auto parts that we needed to put in
the store before we opened it.” Id. Dittrich further testified that, at the time he
looked at the business, there were no employees other than Roger’s wife, the
company provided applications for any public person to fill out, they
interviewed and hired Roger’s son and another person, and that D & D was not
still leasing the building from Chaffins because it moved to a bigger and better
location.
[15] When asked if, when he first operated the store on Talmer Avenue, he used the
same signage as Chaffins, Dittrich indicated it was a NAPA brand logo and
that he did not change the sign. He said that the website was maintained by
NAPA Corporate in Atlanta, Georgia, that the website flags any store that uses
the NAPA name, and that D & D has nothing to do with and does not pay for
the website. He indicated that D & D did not have a store-specific website,
NAPA territories are not protected, and that how many NAPA stores are in an
area depends on the population. When asked what specifically D & D was
protesting, Dittrich testified “I’m protesting the rate. . . . I mean, for a $37,000
investment to go through what I’m doing today? No way. I wouldn’t even had
attempted to do it. I don’t need it. . . . I bought his assets, not his liabilities and
had I known that this was hanging out there, I would not have moved forward
with it.” Id. at 84.
[16] In closing, the DWD’s counsel asked the ALJ to find that D & D was a
successor employer under Ind. Code § 22-4-10-6 or, in the alternative, that D &
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 10 of 23
D did at least acquire a distinct and segregable portion of the organization
under Ind. Code § 22-4-10-6(b). D & D asked the ALJ to overturn the
determination that was made by the DWD.
[17] On January 5, 2015, the ALJ issued a Decision of Liability concluding that D &
D acquired Chaffins’s auto parts retail business only and became a successor
employer pursuant to Ind. Code § 22-4-10-6(b). The ALJ’s decision provides in
part:
The . . . issue involved in this case is whether [D & D] made a
complete acquisition and became a successor employer to Chaffins. In
cases of disposition/acquisition, the [DWD] is bound by specific
statutes, which establish whether a disposition/acquisition results in a
successorship. In applying those statutes, if the [DWD] determines
that a successorship transfer exists, a successor employer’s liabilities,
experience balance, and contribution rate is to be determined based
upon the applicable statutory provisions. . . .
*****
In this case, [D & D] and Chaffins were registered employers with the
[DWD] at the time of the transfer of assets at issue. Both entities were
engaged in the automotive parts retail business. [D & D] acquired
Chaffins’ stock-in-trade, merchandise, inventory, furniture, fixtures,
and miscellaneous equipment used in Chaffins’ store. [] [D & D] took
possession of Chaffins’ business location and Chaffins’ NAPA signage
and phone numbers. [D & D] also hired two employees that once
worked for Chaffins. [D & D] used all of those things to operate its
automotive parts retail business. Accordingly, the [ALJ] concludes
that [D & D] acquired Chaffins’ auto parts retail organization, trade,
or business.
Nevertheless, [D & D] provided testimony that Chaffins also had a
service center in the back of the store. On the Report of Transfer
Form, Ms. Chaffins marked that the sale was an “other” transaction,
instead of a sale of the complete organization. Ms. Chaffins also wrote
an explanation of the “other” designation on the form as a “lease of
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 11 of 23
building” and “purchase of retail business.” [] Moreover, the [ALJ]
notes that Ms. Chaffins reported the effective date of the transfer from
Chaffins to [D & D] as April 23, 2010 but submitted a Report of
Inactivation form stating the Chaffins discontinued operations and
issued its last payroll on September 30, 2011.
Accordingly, the [ALJ] concludes that [D & D] made a partial
acquisition of Chaffins’ business. Specifically, [D & D] acquired
Chaffins’ retail business only. [D & D] did not acquire the service
center portion of Chaffins’ business. Based on the foregoing
conclusions, the statutes and rules relating to partial transfers /
successorships and employer contribution rates, under Indiana
unemployment law, are applicable to the transfer at issue. The
[DWD’s] successorship determination is MODIFIED in favor of [D &
D] and the resulting assessment of contributions, penalty and interest
must be recalculated.
Exhibits at 94. D & D now seeks review of the decision of the ALJ.
Discussion
[18] The issue is whether the conclusion of the ALJ that D & D is a partial successor
of Chaffins under Ind. Code § 22-4-10-6 is correct as a matter of law. The
DWD did not file an appellee’s brief. When an appellee fails to submit a brief,
we do not undertake the burden of developing its arguments, and we apply a
less stringent standard of review, that is, we may reverse if the appellant
establishes prima facie error. Zoller v. Zoller, 858 N.E.2d 124, 126 (Ind. Ct. App.
2006). This rule was established so that we might be relieved of the burden of
controverting the arguments advanced in favor of reversal where that burden
properly rests with the appellee. Wright v. Wright, 782 N.E.2d 363, 366 (Ind. Ct.
App. 2002). Questions of law are still reviewed de novo. McClure v. Cooper, 893
N.E.2d 337, 339 (Ind. Ct. App. 2008).
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 12 of 23
[19] Under Ind. Code § 22-4-32-9, “[a]ny decision of the liability administrative law
judge shall be conclusive and binding as to all questions of fact.” The decision
of the liability administrative law judge may be appealed “solely for errors of
law under the same terms and conditions as govern appeals in ordinary civil
court.” Franklin Elec. Co. v. Unemployment Ins. Appeals of Ind. Dep’t of Workforce
Dev., 953 N.E.2d 1066, 1069 (Ind. 2011). The liability administrative law
judge’s legal conclusions are not entitled to the same deference. Id.
[20] D & D maintains the ALJ’s determination that it was a successor of Chaffins
was improper and argues that it did not purchase substantially all of the assets
of Chaffins and that its experience rating should be recalculated to reflect this
incorrect determination. D & D contends that the facts in this case follow
closely those of Indianapolis Concrete, in that it did not acquire any corporate
name, goodwill, work in progress, patent rights, licenses, trademarks, trade
names, technical data, or book of accounts from Chaffins, and that in fact D &
D acquired even less assets than in Indianapolis Concrete because it did not
acquire any of Chaffins’s customers.
[21] D & D further contends that the primary business of Chaffins was the auto
repair shop, that D & D did not and does not provide any auto repair services,
and that its business is solely the sale of automobile parts. It states that “[t]he
only asset purchase from Chaffins which benefits this business is the purchase
of inventory constituting only approximately 20% of the inventory necessary for
D & D to conduct its business,” that “[a]ll other inventory was purchased from
other suppliers so that D & D could conduct its business,” and that “[a]s a
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 13 of 23
primary auto parts store, the assets purchased from Chaffins were utterly
insufficient to conduct D & D’s chosen business.” Appellee’s Brief at 4. D & D
argues that, in applying the definition used by the court in Indianapolis Concrete,
it is not a successor employer.
[22] Unemployment insurance in Indiana is financed by a tax on Indiana employers.
Franklin Elec., 953 N.E.2d at 1069. Employer contributions are charged
proportionally against an employer’s experience account. Id. (citing Ind. Code
§ 22-4-11-1(a)). As a result, the more unemployment claims that are filed
against an employer, the more that employer must contribute to the
unemployment fund. Id.
[23] Each year, the Department of Workforce Development determines the
contribution rate applicable to each employer, and the contribution is then
credited to an “experience account” established for each employer by the
Department. UTLX Mfg., Inc. v. Unemployment Ins. Appeals of Ind. Dep’t of
Workforce Dev., 906 N.E.2d 889, 892 (Ind. Ct. App. 2009) (citing Ind. Code § 22-
4-11-2(a), (e)). An employer’s experience account is charged when a qualifying
employee receives unemployment benefits based upon unemployment with that
employer. Id. The experience account contribution rate for an employer is
determined, in part, by the balance in its experience account. Id. Therefore,
when a company’s employees file more unemployment claims, its contribution
rate will also increase. Id.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 14 of 23
[24] In the event of a sale of a company, the DWD is responsible for determining the
successorship status of an acquiring employer when either a total or partial
acquisition occurs between employers. Id. (citing Indianapolis Concrete, 900
N.E.2d at 50). A successor employer assumes the resources and liabilities of
the experience account of the predecessor employer with respect to that portion
of the organization, trade or business acquired. Id. The successor employer’s
contribution rate is then adjusted based upon the new balance in its experience
account. Id. If an acquiring employer is denied successor employer status, its
experience account balance does not change after the acquisition and the
employer’s contribution rate is calculated based upon that unchanged balance.
Id.
[25] An “Employer” in Indiana’s unemployment compensation system includes any
“employing unit” which acquires the organization, trade, or business of another
employer and any employing unit which “acquires substantially all the assets
within this state of such an employer used in or in connection with the
operation of such trade or business,” Ind. Code § 22-4-7-2(a), as well as any
employing unit which “acquires a distinct and segregable portion of the
organization, trade, or business within this state of another employing unit . . .
.” Ind. Code § 22-4-7-2(b).
[26] Ind. Code § 22-4-10-6 governs successor employers, and subsection (a) of the
statute applies in part where there is an acquisition of substantially all the assets
of another employer and provides in part:
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 15 of 23
when:
(1) an employing unit (whether or not an employing unit at the
time of the acquisition) becomes an employer under IC 22-4-7-
2(a);
(2) an employer acquires the organization, trade, or business, or
substantially all the assets of another employer; or
(3) an employer transfers all or a portion of the employer’s
trade or business (including the employer’s workforce) to
another employer as described in IC 22-4-11.5-7;
the successor employer shall, in accordance with the rules prescribed
by the department, assume the position of the predecessor with respect
to all the resources and liabilities of the predecessor’s experience
account.
[27] Subsection (b) of Ind. Code § 22-4-10-6 applies in part where there is an
acquisition of a “distinct and segregable portion” of the business of another
employer and provides in part:
when:
(1) an employing unit (whether or not an employing unit at the
time of the acquisition) becomes an employer under IC 22-4-7-
2(b); or
(2) an employer acquires a distinct and segregable portion of the
organization, trade, or business within this state of another
employer;
the successor employer shall assume the position of the predecessor
employer with respect to the portion of the resources and liabilities of
the predecessor’s experience account as pertains to the distinct and
segregable portion of the predecessor’s organization, trade, or business
acquired by the successor. . . . This portion of the resources and
liabilities of the disposing employer’s experience account shall be
transferred in accordance with IC 22-4-11.5.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 16 of 23
[28] Ind. Code §§ 22-4-11.5 relates to assignment of employer contribution rates and
transfers of employer experience accounts, and Ind. Code § 22-4-11.5-7
provides in part:
(a) This section applies to a transfer of a trade or business that meets
the following requirements:
(1) An employer transfers all or a portion of the employer’s
trade or business to another employer.
(2) At the time of the transfer, the two (2) employers have
substantially common ownership, management, or control.
(b) The successor employer shall assume the experience account
balance of the predecessor employer for the resources and liabilities of
the predecessor employer’s experience account that are attributable to
the transfer.
(c) The contribution rates of both employers shall be recalculated, and
the recalculated rate made effective on the effective date of the transfer
described in subsection (a). . . .
[29] In Astral Indus., Inc. v. Ind. Emp. Sec. Bd., the court noted that the word
“substantially” in referring to a predecessor’s assets does not “indicate a
definite, fixed amount of percentage but is an elastic term which must be
construed according to the facts of the particular case” and that “a prime
question in determining whether substantially all of the assets of the
organization or the trade or business was taken over is: Did the acquisition
result in a substantial continuation of the same or a like business?” 419 N.E.2d
192, 197 (Ind. Ct. App. 1981) (citation omitted).
[30] In Ashlin Transp. Servs., Inc. v. Ind. Unemployment Ins. Bd., the court addressed
the meaning of “distinct and segregable” as used in Ind. Code § 22-4-10-6(b)
and noted that employees are assets, at least in a practical business sense, and
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 17 of 23
that when a company acquires employees it may acquire a distinct and
segregable portion of the organization, trade, or business of another employer.
637 N.E.2d 162, 167 (Ind. Ct. App. 1994).
[31] In Indianapolis Concrete, the court observed that, in determining whether one
employer has acquired substantially all of the assets of another under Ind. Code
§ 22-4-10-6(a), courts have considered several factors, including acquisition of
manufacturing equipment and machinery, office equipment, corporate name,
inventories, covenants not to compete, possession of premises, goodwill, work
in progress, patent rights, licenses, trademarks, trade names, technical data, lists
of customers, sales correspondence, books of accounts, and employees
transferred. 900 N.E.2d at 51. The court noted that Indianapolis Concrete had
hired a number of another employer’s former employees, acquired two of the
other business’s clients, and acquired certain assets of the other business
including its phone number, two trucks, and other equipment. Id. at 52. The
court also observed, however, that the owner of Indianapolis Concrete supplied
his own equipment and leased further equipment as well as ten vehicles, that
the work of Indianapolis Concrete was more diverse than the other business’s
work, that the other business had no ongoing projects, and that Indianapolis
Concrete did not acquire the other business’s premises, office equipment,
computers, bank accounts, or goodwill. Id. The court concluded that, in light
of the factors discussed, Indianapolis Concrete did not acquire substantially all
of the assets of the other company but rather acquired assets from which it built
a new business. Id.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 18 of 23
[32] In UTLX Mfg., Union Tank restructured its business into three units, namely,
leasing, manufacturing, and repair, and later UTLX became responsible for
Union Tank’s manufacturing unit. 906 N.E.2d at 893. Union Tank transferred
its manufacturing assets, including machinery, equipment, rail trackage, real
estate, and inventory, as well as hundreds of employees, to UTLX. Id. at 890-
893. The DWD initially determined that UTLX acquired a portion of Union
Tank’s business but later determined, after tracking UTLX’s wage reports, that
the transfer between the disposer and the employer had been a total transfer,
not a partial transfer, and therefore constituted a full successorship. Id. at 891.
On appeal, UTLX argued there had not been a total transfer instead of a partial
sale. Id. The court concluded that UTLX had become an employer to a
distinct and segregable portion of Union Tank and then also went on to hold,
based on the hundreds of wage records showing that virtually all of Union
Tank’s employees in its Indiana manufacturing unit were transferred to UTLX
in addition to machinery, rail trackage, and some buildings and inventory, that
UTLX had acquired substantially all of its predecessor’s assets. Id. at 893-894.
[33] In this case, the ALJ concluded that D & D acquired Chaffins’s auto parts retail
business only and became a successor employer as to that particular portion of
Chaffins’s business. We thus do not examine whether D & D acquired the
service center portion of Chaffins’s predecessor business, such as its business of
repairing engines and rebuilding motors, or the assets attributable to the service
center aspect of Chaffins’s business.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 19 of 23
[34] We turn to whether there was a transfer of a portion or distinct and segregable
portion of Chaffins’s trade or business, namely, its auto parts sales business, to
D & D, and in doing so we consider the factors, to the extent they are
applicable, identified in Indianapolis Concrete and the opinions above. We also
note that a number of the factors set forth in Indianapolis Concrete are not
applicable or do not tend to favor a finding that D & D did or did not acquire a
portion of Chaffins’s business. In particular, the parties did not present
evidence that Chaffins possessed any patent rights, trademarks, technical data,
covenants not to compete, or work in progress and thus the fact D & D may not
have acquired assets in these categories is not significant.
[35] While there is no indication that D & D acquired from Chaffins any particular
customers or lists of customers, sales correspondence, or books of accounts, and
the bill of sale, in referring solely to inventory and furniture, reveals that D & D
did not acquire any goodwill from Chaffins, the evidence establishes that D &
D did acquire other assets.
[36] D & D does not dispute that it acquired the inventories, certain office
equipment, and shelving of Chaffins related to the auto parts sales business.
According to the bill of sale, D & D purchased all of Chaffins’s stock-in-trade,
merchandise, and inventories for $20,798.29 and the furniture, fixtures, and
miscellaneous equipment used in Chaffins’s store for $17,279. While the
purchase of all of Chaffins’s NAPA inventory may or may not have been
adequate to fully stock D & D’s NAPA business, D & D did purchase all of
Chaffins’s inventory. Further, Dittrich testified that D & D purchased Chaffin’s
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 20 of 23
store racking, computers, and gondola shelving. Moreover, both Chaffins, in
the front area of the building on Talmer Avenue, and D & D, after it leased the
same building, were engaged in the business of selling automotive parts to retail
customers.7 In its Report of Transfer form filed with the DWD, Chaffins
indicated that there had been a purchase of its retail business and that it had
ceased operations.
[37] With respect to the store’s premises and location, the evidence establishes that
D & D initially leased the building on Talmer Avenue from the Chaffins family
and that it used the same signage of a NAPA brand logo as Chaffins. Dittrich
testified that D & D used the NAPA name and sold only NAPA auto parts.
While D & D may have relocated its store to a bigger and better location for the
business than before the move, D & D continued to engage in the business of
selling NAPA automotive parts to retail customers and both D & D’s initial and
new locations were NAPA retail stores in North Judson. D & D used the same
telephone number used by Chaffins. In short, D & D took possession of
Chaffins’s auto parts inventory, computers, racking, shelving, business location,
NAPA signage, and phone number.
[38] The DWD’s wage detail reports indicate that two employees who had worked
for Chaffins later worked for D & D. Bottoms testified there was a gap in the
7
While the evidence does not indicate that D & D leased the same area of the building on Talmer Avenue
used by Chaffins to sell auto parts, Dittrich testified that Chaffins may still operate its business from the
location, indicating Chaffins did not vacate the back area of the building or cease its service center business
with the sale and lease to D & D.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 21 of 23
employment of the employees but that the DWD still considered the employee
movement, “especially if it’s a similar business.” Transcript at 25.
[39] As to the name of the business, while D & D did not acquire Chaffins’s legal
corporate name, and Dittrich testified that D & D is not a franchisee and
NAPA does not use territories, the evidence establishes that Chaffins used the
NAPA name prior to the sale and D & D used the NAPA name after the sale.
Further, Chaffins’s business was named “Napa North Judson Roger’s Precision
Auto Supply,” and when answering the phone D & D’s employees identified
the store as NAPA North Judson. Id. at 34.
[40] Chappell testified that D & D purchased Chaffins’s assets and hired the
employees “to operate the same business in the same location under the same
DBA that the former entity had used.” Id. at 34. She also testified that “the
business operated seamlessly between” Chaffins and D & D, that the store was
a Napa store before and after the sale, and that “it never ceased to be a Napa
location.” Id. at 69. Dittrich testified that NAPA presented the opportunity in
North Judson to him and that he had five NAPA locations in Indiana and
eleven in Illinois.
[41] Based upon the record and the considerations discussed above, we conclude
that the ALJ did not err in concluding that D & D acquired Chaffins’s NAPA
retail auto parts sales business and did not acquire the service center portion of
Chaffins’s business and thus that D & D made a partial acquisition of Chaffins’s
business.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 22 of 23
Conclusion
[42] For the foregoing reasons, we affirm the decision of the ALJ.
[43] Affirmed.
Riley, J., and Altice, J., concur.
Court of Appeals of Indiana | Opinion 93A02-1501-EX-58 | September 21, 2015 Page 23 of 23