Opinion
Civil Action No. 22-10807-PBS
2023-04-27
Nathan P. GOLDSTEIN, as he is Executive Director, Massachusetts Laborers' Benefit Funds, Plaintiff, v. BATISTA CONTRACTING LLC, Rochester Bituminous Products, Inc., and Rochester Paving Co., Inc., Defendants.
James A.W. Shaw, Sasha N. Gillin, Sophie C. Esquier, Segal Roitman LLP, Boston, MA, for Plaintiff. Gary G. Pelletier, Pelletier, Clarke & Caley, Newport, RI, for Defendant Batista Contracting LLC. Benjamin J. Wish, Maria T. Davis, Todd & Weld LLP, Boston, MA, for Defendant Rochester Bituminous Products, Inc. Benjamin J. Wish, Todd & Weld LLP, Boston, MA, for Defendant Rochester Paving Co., Inc.
James A.W. Shaw, Sasha N. Gillin, Sophie C. Esquier, Segal Roitman LLP, Boston, MA, for Plaintiff. Gary G. Pelletier, Pelletier, Clarke & Caley, Newport, RI, for Defendant Batista Contracting LLC. Benjamin J. Wish, Maria T. Davis, Todd & Weld LLP, Boston, MA, for Defendant Rochester Bituminous Products, Inc. Benjamin J. Wish, Todd & Weld LLP, Boston, MA, for Defendant Rochester Paving Co., Inc. MEMORANDUM AND ORDER Saris, District Judge
INTRODUCTION
Plaintiff Nathan P. Goldstein, as Executive Director of the Massachusetts Laborers' Benefit Funds ("Funds"), seeks to enforce audit rights under a collective bargaining agreement against a signatory, Batista Contracting LLC ("Batista"), and a non-signatory, Rochester Bituminous Products, Inc. ("Bituminous"). The Funds contend that Batista and Bituminous are alter egos and operate as a single employer with a single appropriate bargaining unit. The Funds seek to recover contributions allegedly owed for hours worked by Batista's laborers working for Bituminous. After hearing, the Court ALLOWS IN PART and DENIES IN PART the Funds' motion for preliminary injunction, temporary restraining order, and prejudgment attachments (Dkt. 39).
BACKGROUND
Based on the factual record, including affidavits and documentary evidence submitted by the parties, the Funds have demonstrated that the following facts are likely.
I. Factual Background
A. The Parties
The Funds are multi-employer benefit plans and third-party beneficiaries of collective bargaining agreements between signatory employers and the Massachusetts and Northern New England Laborers' District Council ("Union"). The Funds provide participating employees with various benefits, including health insurance, pension, and retirement benefits.
Defendant Bituminous was incorporated in 1994 by Idael Batista ("Mr. Batista") and Angelo Todesca. Mr. Batista served as Bituminous' sole officer until 2010. For 22 years, Bituminous was a business that manufactured and sold asphalt. In 2016, the company also began bidding on road construction and paving jobs. Bituminous' current President is Thomas Russo.
Defendant Batista was incorporated in 2011 by Mr. Batista. Mr. Batista and his son, Joseph Batista, are the only listed officers of the company. The company does road construction and paving work, including curb and sidewalk repair. Batista's and Bituminous' laborers work side-by-side on projects and use the same Bituminous-owned equipment and vehicles.
B. Collective Bargaining Agreement
On May 1, 2017, Batista signed a collective bargaining agreement ("CBA") with the Union. The CBA requires Batista to make contributions to the Funds for each hour worked by covered employees according to prescribed rates. The CBA also requires Batista to undergo audits of its payroll records to verify laborers' hours and contribution amounts owed to the Funds. Employees are entitled to health and welfare benefits from the Funds if they meet certain hour requirements. Bituminous is not a signatory to the CBA.
II. Procedural History
The Funds brought this action in May 2022 and filed an amended complaint in February 2023, alleging violations of sections 502 and 515 of the Employee Retirement Income Security Act of 1974 (ERISA) and section 301 of the Labor Management Relations Act of 1947 (LMRA). 29 U.S.C. §§ 185, 1132(a)(3), 1132(d)(1), 1145. In January 2023, the Funds moved for the following injunctive relief:
(1) issue a preliminary injunction ordering Defendants to comply with the Funds' audit request and provide the Funds' Auditors access to the necessary payroll and other documentation required to identify Fund participants and liquidate the Funds' claim for contributions owed for the period May 1, 2017 through the date of this Court's Order;Dkt. 40 at 2. Following a hearing in March 2023, the Court ordered Batista, the signatory to the CBA, to comply with the Funds' audit and enjoined Batista from transferring any assets outside of the ordinary course of business. Dkt. 86. The Court now addresses the Funds' remaining request for injunctive relief with respect to Bituminous, the non-signatory to the CBA.
(2) issue a temporary restraining order enjoining Defendants from conveying or transferring assets or funds except in the normal course [of business] and for documented legitimate business purposes; and
(3) attach Defendants' unexempt assets up to the value of $1,812,362.20, including Defendants' bank accounts by trustee process and the vehicles and equipment listed on Exhibit A to the attached Proposed Order of Attachment.
The Funds initially filed this motion ex parte. The Court denied the request for ex parte relief. Dkt. 45.
After the instant motion and related briefing was filed, the Funds added Rochester Paving Co., Inc. ("Paving") as a defendant. Dkt. 78. The Funds have not moved to request injunctive relief be extended to Paving. See Dkt. 39 at 2 n.1.
DISCUSSION
I. Preliminary Injunction and Temporary Restraining Order
A. Legal Standard
The Court applies the same standard in assessing requests for temporary restraining orders and preliminary injunctions. Orkin v. Albert, 557 F. Supp. 3d 252, 256 (D. Mass. 2021). The plaintiff must show "(1) a substantial likelihood of success on the merits, (2) a significant risk of irreparable harm if the injunction is withheld, (3) a favorable balance of hardships, and (4) a fit (or lack of friction) between the injunction and the public interest." NuVasive, Inc. v. Day, 954 F.3d 439, 443 (1st Cir. 2020) (quoting Nieves-Márquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2003)). While all four factors are relevant, likelihood of success is the "main bearing wall" of the preliminary injunction framework. Corp. Techs., Inc. v. Harnett, 731 F.3d 6, 10 (1st Cir. 2013) (quoting Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 16 (1st Cir. 1996)) (cleaned up).
B. Analysis
1. Likelihood of Success
The Funds' likelihood of success hinges on the central question of whether Bituminous, a non-signatory and non-union company, is bound by the CBA. The Funds contend that Bituminous is bound by the CBA because the company is Batista's "alter ego" and the two companies constitute a single employer with a "single appropriate bargaining unit" of employees. See Dkt. 40 at 12-13 (citing C.E.K. Indus. Mech. Contractors, Inc. v. NLRB, 921 F.2d 350, 353-54 (1st Cir. 1990)).
In certain instances, two employers can be treated as alter egos in ERISA actions for unpaid employee benefits. See NLRB v. Hosp. San Rafael, Inc., 42 F.3d 45, 50 (1st Cir. 1994). Although enterprises comprised of both union and non-union companies (so-called "double-breasted operations") are "neither uncommon nor inherently unlawful," civil liability for benefit contributions may be imposed on the non-union entity if the corporate form is used to evade obligations of the union entity. Mass. Carpenters Cent. Collection Agency v. A.A. Bldg. Erectors, Inc., 343 F.3d 18, 21-22 (1st Cir. 2003). Courts determine whether a non-signatory is an alter ego of a signatory by considering several factors, including "continuity of ownership, similarity of the two companies in relation to management, business purpose, operation, equipment, customers, supervision, and anti-union animus -- i.e., whether the alleged alter ego entity was created and maintained in order to avoid labor obligations." Mass. Carpenters Cent. Collection Agency v. Belmont Concrete Corp., 139 F.3d 304, 308 (1st Cir. 1998) (quoting Hosp. San Rafael, 42 F.3d at 50) (cleaned up).
On the record before the Court, the Funds have demonstrated they are likely to succeed in proving that Batista and Bituminous are alter egos. First, a continuity of ownership exists because the two companies are owned by members of the Batista and Todesca families. The two families are related through Mr. Batista's marriage to Diane, Albert Todesca's sister. See Belmont Concrete, 139 F.3d at 308 ("Continuity of ownership has been found to exist when the nonsignatory and signatory companies are owned by members of the same family."). Mr. Batista was the original owner of both companies and remains an owner of Batista. Although Mr. Batista no longer owns Bituminous, trust certificates and probate documents indicate that Bituminous shares are owned by Todesca family members or were transferred to Todesca family trusts.
Second, with respect to management, the Court finds that Albert Todesca ("Mr. Todesca"), Mr. Batista's brother-in-law, likely manages and operates both companies. In his affidavit, Mr. Todesca states that he "was never involved in any office work or management" of Bituminous. Dkt. 61 ¶ 9, at 2. Yet during a plea hearing in 2009, Mr. Todesca attested to operating Bituminous from at least January 2002 to December 2006. Dkt. 44-1 at 201-03. Several court filings and press releases refer to Mr. Todesca as Bituminous' manager. E.g., id. at 135 ("Albert Todesca, the founder of [Bituminous], exercised control over [Bituminous's] business operations but held no formal title."); Dkt. 59-1 ¶ 5, at 6 (Bituminous "was owned and operated by Albert Todesca"); Dkt. 44-1 at 98 (referring to Mr. Todesca as Bituminous' "Manager"). According to laborers, Mr. Todesca "controls everything at Bituminous [and] Batista," Dkt. 43 ¶ 17, at 2, and makes "all decisions for both [c]ompanies." Dkt. 42 ¶ 29, at 9. The Court also finds that Thomas Russo was likely involved in managing both companies, as he simultaneously held positions as both Bituminous' President and Batista's payroll clerk in the past.
Finally, as to the other alter ego factors, the record demonstrates that the companies are physically and operationally intertwined. Both companies are in the road construction business. In fact, Batista likely works primarily for Bituminous. The certified payroll records show that the companies have worked on several of the same projects. Both companies share many of the same laborers: 24 of Batista's 28 laborers appear on Bituminous' payroll records from 2017 to 2021. Laborers of both companies work side-by-side, use the same equipment and vehicles, and report to the same supervisors. Although the companies have different listed business addresses, their laborers seem to arrive for work in the same locations, including an industrial yard in Hyde Park owned by Mr. Todesca.
In his affidavit, Mr. Batista states that "Batista performs work for other clients other than [Bituminous]." Dkt. 62. However, Defendants do not name any other clients or provide evidence of other bids or contracts.
In response, Bituminous argues that the entities are distinct and deal with each other through "arms' length negotiations." Dkt. 59 at 8. However, the lack of any written contracts or invoices between the companies, coupled with their "flat fee" arrangement, weighs against such a finding. Bituminous also explains that Batista's laborers sometimes worked directly for Bituminous because these laborers were simply looking "to pick up extra hours of work when there were no Batista jobs." Dkt. 59 at 3. Yet the record indicates that on any given project, laborers often did not know which entity they were working for or who would be signing their checks.
Bituminous also argues that the Belmont Concrete factor analysis and the findings above are not enough to justify the application of the alter ego doctrine. Relying on A.A. Bldg. Erectors, Bituminous contends that the Funds cannot prevail under an alter ego theory without also finding (1) that Bituminous deceived or defrauded the Funds or the Union or (2) a structural change occurred that shifted union business away from Batista. 343 F.3d at 22. But the First Circuit in A.A. Bldg. Erectors did not explicitly mandate findings of fraud or structural change. In fact, such findings of "anti-union animus" are not required in an alter ego analysis. See Mandarini v. Accurate Engineered Concrete, Inc., 433 F. Supp. 3d 186, 199 (D. Mass. 2019) ("[W]rongful motive or fraudulent intent is not required to impose alter ego liability."); United States v. Thompson, 207 F.Supp. 3d 106, 111 (D. Mass. 2016) ("The order of creation of the union and non-union aspects of the double-breasted operation is not determinative . . . . The mere existence of [a] parallel structure makes it possible to skirt CBA obligations by siphoning off union work to the non-union affiliate.") (cleaned up); Belmont Concrete, 139 F.3d at 309 ("A finding of anti-union animus is not essential to sustain a finding that [two companies] are alter egos."). Rather, A.A. Bldg. Erectors stands for the proposition that "the alter ego doctrine -- an equitable doctrine -- should not be invoked in the absence of inequity." Flynn v. Interior Finishes, Inc., 425 F. Supp. 2d 38, 53 (D.D.C. 2006); see A.A. Bldg. Erectors, 343 F.3d at 21-22 ("[T]he [alter ego] doctrine is a tool to be employed when the corporate shield, if respected, would inequitably prevent a party from receiving what is otherwise due and owing from the person or persons who have created the shield.").
The Funds argue that the "double-breasted" arrangement likely was created by Bituminous to avoid labor obligations. According to Thomas Russo, Bituminous began performing road construction work in 2016. At that time, the company started "consistently us[ing] union companies as subcontractors on its work" because it was "difficult, if not impossible, to find skilled, non-union laborers to undertake the more sophisticated aspects of road construction projects." Dkt. 60 ¶ 7, at 2. Shortly thereafter, in May 2017, Batista signed the CBA with the Union. Between 2017 and 2019, Batista's union laborers were still being paid with paychecks from Bituminous. Based on this timing, the Funds allege that the companies arranged a "special deal whereby Batista would sign a Union contract and then provide those Union laborers to Bituminous on the cheap[.]" Dkt. 70 at 5. This would also allow Bituminous to avoid paying contributions to the Funds. These facts raise a credible inference of inequity for which application of the alter ego doctrine is appropriate. The Funds have therefore established a substantial likelihood of success in proving that Bituminous and Batista are alter egos and that both entities are thus bound by the CBA.
Because the Funds have demonstrated a substantial likelihood of success in proving that Bituminous is bound by the CBA under an alter ego theory of liability, the Court declines to address the alternative single employer theory of liability.
The Court acknowledges that circuits have split over whether the district courts or the National Labor Relations Board has jurisdiction to decide whether an entity's employees constitute a "single appropriate bargaining unit." The First Circuit has not yet addressed the issue. See Mandarini, 433 F. Supp. 3d at 203.
2. Irreparable Harm
The Court finds that the Funds and the union laborers they support face a "significant risk of irreparable harm if the injunction is withheld." NuVasive, 954 F.3d at 443. Batista laborers working for Bituminous report being paid below the prevailing wage and not receiving benefits. Moreover, the Funds identified at least five laborers who "had to pay extra to buy in hours because they did not have enough hours reported by Batista to qualify for benefits, even though it appears they in fact worked enough hours to qualify if their Bituminous hours had been reported." Dkt. 42 ¶ 18, at 7. The Court finds that laborers participating in the Funds could be in danger of being underpaid and/or overpaying for their benefits, resulting in irreparable injury. Absent an immediate audit and injunction on transfers outside of regular business, the Funds' ability to collect contributions to support employee benefits could be jeopardized.
3. Balance of Hardships and Public Interest
Finally, the Court concludes that the Funds have adequately shown that the balance of hardships weigh in their favor. The potential harm to Bituminous in complying with an audit is outweighed by the risk that the Funds may not be able to collect contributions owed to them. Bituminous will still be able to continue its usual business operations, as the requested injunction excludes transfers in the normal course of business that have a documented and legitimate business purpose. Furthermore, protecting the health and welfare benefits of participating union laborers that are provided by the Funds is in the public interest.
II. Prejudgment Attachments
A. Legal Standard
In federal court, the remedy of prejudgment attachment is available "under the law of the state where the court is located[.]" Fed. R. Civ. P. 64. Massachusetts law, in turn, provides that a plaintiff seeking prejudgment attachment must demonstrate "(1) reasonable likelihood of success on merits, and (2) reasonable likelihood of recovering judgment equal to or greater than amount of attachment sought that is over and above any liability insurance shown by defendant to be available to satisfy judgment." Ruggieri v. M.I.W. Corp., 826 F. Supp. 2d 334, 336 (D. Mass. 2011); see Mass. R. Civ. P. 4.1(c). A motion to attach must also be supported by an affidavit or set of affidavits that set forth "specific facts sufficient to warrant the required findings." Mass. R. Civ. P. 4.1(h).
B. Analysis
The requirements of Mass. R. Civ. P. 4.1 are satisfied. As explained above, the Funds have met their burden of demonstrating a reasonable likelihood of success on the merits of their claims. The Funds seek attachment in the amount of $1,812,362.20, which includes an estimate of unpaid contributions plus interest, liquidated damages, and attorney's fees to date, pursuant to 29 U.S.C. § 1132(g)(2). The Funds' Auditing Manager submitted an affidavit calculating the allegedly unpaid contributions based on certified payroll records received from municipalities in response to public records requests. The Funds have thus "itemized in their motion and affidavit the amounts owed to them" and "[t]he defendants do not challenge that amount." Greenbriar Cos. v. Springfield Terminal Ry., 477 F. Supp. 2d 314, 318 (D. Mass. 2007). Furthermore, Bituminous does not prove, or even contend, that liability insurance is available to satisfy the judgment, as is its burden under the law. Id.
As to what property may be attached, Batista and Bituminous appear to own various vehicles and equipment related to their business. See Dkt. 39-1 at 5-10. However, the Defendants "likely need their motor vehicles for everyday use [and] [t]he actual seizure of these physical assets would undoubtedly put [Defendants] out of business." Pineda v. Skinner Servs., Inc., No. 16-12217-FDS, 2019 WL 8262655, at *3 (D. Mass. Dec. 23, 2019). Accordingly, the Court will allow attachment as to the vehicles and equipment of Batista and Bituminous up to the amount of $1,812,362.20, provided that these assets may remain in Defendants' physical custody and may be used in the ordinary course of business.
The Funds also request the attachment of Defendants' bank accounts at Martha's Vineyard Savings Bank. See Dkt. 39-1 at 11-12. The record is limited as to whether these accounts are payroll accounts and if attachment by trustee process would put Defendants out of business. Because it appears unnecessary to attach these accounts given other relief provided, the Court will not order attachment by trustee process of Defendants' bank accounts.
ORDER
Plaintiff's motion for a preliminary injunction and temporary restraining order with respect to Rochester Bituminous Products, Inc. is ALLOWED . Plaintiff's motion for prejudgment attachments is ALLOWED IN PART only as to the vehicles and equipment owned by Batista Contracting LLC and Rochester Bituminous Products, Inc. up to the value of $1,812,362.20, provided that those assets may remain in the physical custody of Defendants and may be used in the ordinary course of business. Plaintiff shall submit proposed orders within 14 days. SO ORDERED.