Opinion
Civil No. A3-01-110, Docket Number: 84
February 3, 2004
MEMORANDUM AND ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT
Summary: The plaintiff, a pension fund administered in accordance with the provisions of ERISA, moved for summary judgment on the basis that the Northern District of Iowa and the NLRB previously adjudicated the defendant's status as an alter ego subject to the terms of a collective bargaining agreement. The Court denied the motion for summary judgment finding the alter ego determination for ERISA was different than the labor law alter ego determination made by the Northern District of Iowa and the NLRB. The Court also denied the defendant's motion for partial summary judgment to offset duplicative fringe benefit payments.
I. INTRODUCTION
The plaintiff, Dakotas and Western Minnesota Electrical Workers Health and Welfare Fund ("the Fund"), motion the Court for summary judgment (doc. #53). The defendant, All County Electrical Company ("All County"), resists the plaintiff's motion for summary judgment and brings its own motion for partial summary judgment (doc. #54). For reasons articulated below, the plaintiff's Motion for Summary Judgment and the defendant's Motion for Partial Summary Judgment are DENIED.
II. BACKGROUND
The Fund is a multi-employer, jointly-trusteed fringe benefit plan created and maintained pursuant to the Labor Management Relations Act, 29 U.S.C. § 186(c)(5), and administered in accordance with the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.
All County is a partially nonunion electrical contractor based in Waterloo, Iowa. In 1980, owners of another electrical contractor, a union contractor, Black Hawk Electric, incorporated All County because of the difficulties in doing business in competition with nonunion firms. Eventually, Black Hawk ceased doing business and sold its assets to All County and its name to another firm, CCT Corporation. All County and CCT, while separate entities, maintained a close working relationship.
At some point, the International Brotherhood of Electrical Workers Local Union No. 228 brought CCT, All County and Black Hawk to arbitration before the Labor/Management Committee. The Union alleged All County was the alter ego of Black Hawk and CCT Corporation. Black Hawk was a signatory to the collective bargaining agreement that required, among other things, the employer to pay fringe benefit contributions to the Fund. On January 23, 1997, the arbitrator concluded that All County was in fact the "alter ego" of Black Hawk and therefore it was bound by the collective bargaining agreement.
The Union and the Waterloo/Cedar Falls Division of the Iowa Chapter of the National Electrical Contractors Association ("NECA"), of which Black Hawk was a member, entered into various collective bargaining agreements. The agreements were in effect from June 1st through May 31st of each year. A party desiring to change or terminate the agreement must provide notice at least ninety days prior to the anniversary date.
The Union commenced an action in the United States District Court for the Northern District of Iowa to enforce the terms of an arbitration award against All County and others. The district court entered Judgment for the Union, ordering All County to comply with the "terms and conditions of the January 23, 1997-arbitration award." The Eighth Circuit Court of Appeals affirmed the district court's ruling.
All County also requested National Labor Relations Board ("NLRB") review of the arbitrator's alter ego finding. The Regional Director concluded All County was the alter ego of Black Hawk electric and maintained a § 9(a) representational relationship with the Union. The NLRB rejected All County's request for review, affirming the Regional Director's conclusion that All County was created with a purpose to evade Black Hawk's collective bargaining obligations.
In September of 2001, the Fund filed a Complaint in this Court to recover unpaid contributions to an employee pension fund administered in accordance with ERISA. The parties now ask the Court to resolve the action, or at least part of the action, by way of summary judgment.
III. DISCUSSION
Summary judgment permits courts and litigants to avoid trial in unwinnable cases, thus conserving time, money and other valuable legal and judicial resources. Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir. 1992). In the instant case, the Fund asserts, citing the doctrines of res judicata (hereinafter, "claim preclusion") and collateral estoppel (hereinafter, "issue preclusion"), that trial is unnecessary because the Northern District of Iowa and the National Labor Relations Board ("NLRB") already resolved all the disputed factual issues necessary to hold All County liable for the unpaid contributions. This assertion is important in light of the summary judgment standard, which is summary judgment is properly granted when the record, viewed in the light most favorable to the nonmoving party and giving that party the benefit of all reasonable inferences, shows that there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c).
A. The Fund's Motion for Summary Judgment
As mentioned above, the Fund moves for judgment as a matter of law on the basis that the Northern District of Iowa and NLRB already adjudicated All County's alter ego liability under the terms of the collective bargaining agreement; thus, claim preclusion, or in the alternative issue preclusion, forecloses re-adjudication in the present case. See IBEW Local #288 v. CCT Corp. d/b/a Black Hawk Electric Co. and All County Electric Co., Case No. C97-2036-MJM (N.D. Iowa Sept. 29, 1998) (adopting an arbitration award that found All County an alter ego of Black Hawk Electric and bound by the collective bargaining agreement); In Re All County Electric Co., 332 N.L.R.B. No. 72, 2000 WL 1636779 (Oct. 25, 2000) (finding All County an alter ego of Black Hawk Electric).
The pivotal question is whether or not the current suit involves the same claim or cause of action previously adjudicated by the Northern District of Iowa and NLRB. This question is pivotal because both claim preclusion and issue preclusion require, among other factors, a previous suit to be based on the same claims or causes of action as the current suit. Costner, et. al. v. URS Consultants, Inc., et. al., 153 F.3d 667, 673 (8th Cir. 1998) (recognizing that a claim is precluded by a prior suit when both suits are based upon the same claims or causes of action);Liberty Mut. Ins. Co. v. FAG Bearings Corp., 335 F.3d 752, 758 (8th Cir. 2003) (finding an issue precluded only when the prior suit involved the same claim). The Court, after reading the decisions of the Northern District of Iowa and the NLRB, finds the alter ego claim raised by the Fund in this suit different from the alter ego claim raised before the Northern District of Iowa and NLRB. The Northern District of Iowa and NLRB found All County an alter ego for labor law purposes. The present case does not involve labor law, but liability for unpaid contributions to a pension fund administered pursuant to ERISA.
In Greater Kansas City Laborers Pension Fund v. Superior General Contractors, Inc., 104 F.3d 1050, 1055 (8th Cir. 1997), the Eighth Circuit Court of Appeals held alter ego claims under ERISA are evaluated differently than alter ego claims under labor law. The court stated ERISA claims should be evaluated using the corporate law standard for alter ego liability, not the less stringent labor law standard. Id. The court explained:
The alter ego doctrine as developed under the National Labor Relations Act (NLRA), 29 U.S.C. § 151 et seq., involves a more lenient standard for disregarding the corporate form than that employed in corporate law. The focus of the labor law alter ego doctrine `is on the existence of a disguised continuance of a former business entity or an attempt to avoid the obligations of a collective bargaining agreement.' By contrast, the alter ego doctrine as developed under corporate law provides that the legal fiction of the separate corporate entity may be rejected in the case of a corporation that (1) is controlled by another to the extent that it has independent existence in form only and (2) is used as a subterfuge to defeat public convenience, to justify wrong, or to perpetuate a fraud. Thus, control by one company over its alleged alter ego is necessary under the corporate law standard.Id. (citations omitted). "The essence of the [corporate law alter ego] test is whether or not under all the circumstances the transaction carries the earmarks of an arm's length bargain." Id. (quoting In re B.J. McAdams, 66 F.3d 931, 937 (8th Cir. 1995)).
Therefore, as the district court stated in Carpenters and Joiners Welfare Fund v. Wayne, 2003 WL 21730105 at *2 (D. Minn. July 21, 2003), "in actions arising under ERISA, principals of corporate law determine whether a non-signatory employer is liable for unpaid contributions as the alter ego of the signatory employer." The previous adjudications involved the labor law standards of alter ego liability, thus claim preclusion and issue preclusion are inapplicable. The Fund's Motion for Summary Judgment is DENIED.
B. All County's Motion for Partial Summary Judgment
All County moves for summary judgment on one particular issue-whether the principals of unjust enrichment prevent recovery of duplicative fringe benefits by a pension fund. During the applicable period, All County did not make contributions to the Fund, but it administered and sponsored health insurance benefits which it argues were comparable to, and life insurance benefits which it argues were superior to, the benefits provided by the Fund. All County urges this Court to apply the rule of law recognized in Gondorf, Field, Black Co. v. N.L.R.B., 107 F.3d 882, 888 (D.C. 1997) and Manhattan Eye Ear Throat Hosp. v. N.L.R.B., 942 F.2d 151, 159-60 (2d. Cir. 1991), which is "if an employer has provided employees with alternative benefits, reimbursement is inappropriate to the extent that it `fails to benefit the employees and results in a windfall to the Union funds.'" All County contends that if this rule of law is applied, its contributions to the Fund must be reduced to the extent that it provided comparable benefits, otherwise the plan beneficiaries profit unjustly.
The Fund classifies this rule as the "minority view," and urges this Court to apply the "majority view" as that rule is expressed in Hinson v. N.L.R.B., 428 F.2d 133, 139 (8th Cir. 1970); Stone Boat Yard v. N.L.R.B., 715 F.2d 441, 446 (9th Cir. 1983); N.L.R.B. v. Transport Service Co., 973 F.2d 562 (7th Cir. 1992); and In Re Harding Glass Co. Inc., 337 N.L.R.B. No. 175, 2002 WL 1860003, at *1 (August 1, 2002). The "majority rule" holds that an employer is liable to pay contributions owing to an ERISA union fringe benefit plan, and the employer is not entitled to offset payments made to an alternative company-sponsored health plan.Stone Boat Yard, 715 F.2d at 446.
The Court recognizes the highly persuasive, if not binding, opinion of the Eighth Circuit in Hinson. In Hinson, the court noted in a footnote that an employer is in "no position to complain" where by its voluntary wrongful action it is obligated to pay duplicative fringe benefits. 428 F.2d at 138 n. 3. However, Hinson involved a different fact pattern than the one presently before the Court. In any event, the Court is not convinced of the divergent nature of the so-called "minority" and "majority" rules. The cases cited above by the Fund and All County represent wildly different fact-patterns and circumstances. The Court believes the application of the offset rule is highly factual. The factual record is not yet fully developed; summary judgment is therefore DENIED.
C. Judicial Restraint
On January 6, 2004, the Court held a telephone conference with the attorneys to discuss a stay of proceedings pending the decision in three related cases currently before the Northern District of Iowa. All County urges this Court to consider refraining from judgment because of the alleged risk of rendering a decision inconsistent with cases currently pending in Iowa. The Fund agrees the prudent measure is to await a decision by the Iowa court as far as the new contract (after May 31, 2003), but strongly recommends taking action on the January 1, 1997 to May 31, 2003 time period. After considering arguments from both parties, the Court declines to stay the proceedings. The proceedings will continue as scheduled for all relevant periods.
IV. CONCLUSION
The Fund's Motion for Summary Judgment is DENIED (doc. #53). All County's Motion for Partial Summary Judgment is also DENIED (doc. #54). The Fund's Motion for Oral Argument is DENIED. All County's Motion for Leave to File Surreply is GRANTED (doc. #71). All County's Motion for Leave to Amend Defendant's Answer to Plaintiff's First Amended Complaint is GRANTED (doc. #81).
IT IS SO ORDERED.