Opinion
Case No. 3:99CV7406.
October 31, 2001
James H. O'Doherty, Shumaker, Loop Kendrick, Toledo, OH., for Plaintiff and 3rd Party Defendant, Northwestern Ohio Administrators, Inc.
Robert A Koenig, Shumaker, Loop Kendrick, Toledo, OH., for Plaintiff, Northwestern Ohio Administrators, Inc.
Thomas P. Dillon, Shumaker, Loop Kendrick, Toledo, OH., for Plaintiff, Northwestern Ohio Administrators, Inc.
Charles P. Baither, III, Robison, Curphey O'Connell, Toledo, OH., for Defendant and 3rd Party Plaintiff, S.E.A. Builders, Corp.
Margaret Mattimoe Sturgeon, Eastman Smith Toledo, OH., for Deke Enterprises.
Patrick J Johnson, Eastman Smith, Toledo, OH., for Deke Enterprises.
Matthew J. Fischer, Rohrbachers Light Cron Zmuda Trimble, Toledo, OH., 3rd Party Defendant, Northwestern Ohio Administrators, Inc.
Todd M. Zimmerman, Rohrbachers Light Cron Zmuda Trimble, Toledo, OH., 3rd Party Defendant, Northwestern Ohio Administrators, Inc.
ORDER
This breach of contract case is brought under the Employee Retirement Income Security Act (ERISA), codified at 29 U.S.C. § 1001, et seq., and the Labor Management Relations Act, codified at 29 U.S.C. § 185,et seq. Plaintiff Northwestern Ohio Administrators (NOA) seeks enforcement of a contract between Defendant S.E.A. and Iron Workers Local No. 55 of the International Association of Bridge, Structural and Ornamental Iron Workers (Local 55). NOA contends that Defendant Deke Enterprises is an "alter ego" of S.E.A. and, therefore, should be held liable under the contract between S.E.A. and Local 55. Pending are cross-motions for summary judgment on the issue of whether Deke is an alter ego of S.E.A. For the following reasons, both motions shall be denied.
BACKGROUND
Plaintiff, NOA, is a non-profit corporation whose principal place of business is Toledo, Ohio. NOA is responsible for the administration of employee benefit plans and trusts established and maintained for those employed by the construction industry in Northwestern Ohio.
Defendant S.E.A. is an Ohio corporation engaged in the construction industry. Defendant Deke is an Ohio corporation also engaged in the construction industry. Allen Frey and Ed Baer each own fifty percent of S.E.A., while their wives, Amy Frey and Marlene Baer, each own fifty percent of Deke.
Sam Frey, Ed Baer, and Allen Frey incorporated S.E.A. in 1989. At that time, the three individuals held ownership of S.E.A. equally. Sam Frey was president, Ed Baer was vice president and Allen Frey was secretary/treasurer. Sometime in 1990, Ed Baer and Allen Frey bought out Sam Frey's share in S.E.A., ending Sam Frey's involvement in S.E.A. At that time, Ed Baer became president and Allen Frey remained secretary/treasurer.
Prior to 1992, S.E.A. had been involved in the buying, selling, and erecting of steel buildings. S.E.A. performed "turnkey projects," where S.E.A. would handle all phases of the construction of steel buildings for its customers. Between 1991 and 1992, S.E.A. ceased erecting steel buildings for its customers and now focuses exclusively on buying and selling steel buildings.
Allen Frey described S.E.A. as a "one stop shop" for the furnishing of steel buildings. (Allen Frey Dep. at 9).
S.E.A.'s business is now primarily focused on the purchasing and selling of the raw materials necessary to construct steel buildings.
In approximately 1992, Ed Baer, Allen Frey, and their wives, Marlene Baer and Amy Frey, formed Deke corporation. Ownership of Deke is split equally among Marlene Baer and Amy Frey. Amy Fey is the president of Deke and Marlene Baer is the vice-president. Neither Ed Baer nor Allen Frey has an ownership interest in Deke, yet each receives a salary of $2000 per week from Deke. Marlene Baer and Amy Frey receive no income from Deke.
Since its incorporation, Deke's business has been primarily the erection of steel buildings. Deke leases office space in the same building as S.E.A. and shares phone lines, a fax machine, and a coffee machine with S.E.A.
On June 15, 1990, S.E.A. signed a certificate accepting the terms of a Collective Bargaining Agreement (CBA) between the Labor Relations Division of the Associated General Contractors of Northwestern Ohio (Association) and Local 55. The CBA was effective from July 1, 1989 through June 30, 1992.
Although S.E.A. signed a document accepting the terms of the CBA, S.E.A. did not actually sign the CBA.
Under the CBA, NOA was to collect union dues, assessments, health and welfare, pension, vacation, promotional, administrative, and apprenticeship benefits from non-association contractors, including S.E.A. S.E.A. was obligated to forward the official payroll reporting forms to NOA by the fifteenth day of each calendar month. Failure to comply potentially subjected S.E.A. to liquidated damages, reasonable attorney's fees, and costs incurred for collection.
NOA filed this suit seeking an order requiring that S.E.A. comply with the terms of the CBA by producing all employee payroll records from January 1, 1994, to the date of judgment and by paying all amounts due under successive CBAs, liquidated damages, the cost of the audit, and reasonable attorney's fees. NOA asserts that Deke is an alter ego of S.E.A. and, therefore, is jointly and severably liable for S.E.A.'s obligations under the CBA.
STANDARD OF REVIEW
Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed.R.Civ.P. 56(e)).
Once the burden of production shifts, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is insufficient "simply [to] show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, Rule 56(e) "requires the nonmoving party to go beyond the [unverified] pleadings" and present some type of evidentiary material in support of its position. Celotex, 477 U.S. at 324.
In deciding the motion for summary judgment, the evidence of the non-moving party will be believed as true, all doubts will be resolved against the moving party, all evidence will be construed in the light most favorable to the non-moving party, and all reasonable inferences will be drawn in the non-moving party's favor. Eastman Kodak Co. v. Technical Services, Inc., 504 U.S. 451, 456 (1992). Summary judgment shall be rendered only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).
DISCUSSION
NOA alleges that Deke is the alter ego of S.E.A., and, therefore, Deke should be held liable for any of S.E.A.'s obligations arising under the collective bargaining agreement between Local 55 and S.E.A.
In the context of labor disputes, the alter ego doctrine has developed to prevent employers from evading labor law obligations merely by changing or altering their corporate form. NLRB v. Allcoast Transfer, Inc., 780 F.2d 576, 579 (6th Cir. 1986). "The doctrine `will be applied, when appropriate, to treat two nominally separate business entities as if they were a single continuous employer.'" Id. (quoting Alkire v. NLRB, 716 F.2d 1014, 1018 (4th Cir. 1983)). "To determine whether application of the [alter ego] doctrine is appropriate, the circumstances surrounding a change in corporate form must be examined to determine whether the change resulted in a `bona fide discontinuance and a true change of ownership' or was merely a `disguised continuance of the old employer.'"Id. (quoting Southport Petroleum Co. v. NLRB, 315 U.S. 100, 106 (1942)).
A determination of alter ego status is a question of fact. Id. The Sixth Circuit has recognized that the factors relevant to a finding of alter ego status include "whether the two enterprises have substantially identical management, business purpose, operation, equipment, customers, supervision, and ownership." Id. (quoting Nelson Electric v. NLRB, 716 F.2d 965, 968 (6th Cir. 1981)). Further, the Sixth Circuit has held that intent to evade labor law obligations or anti-union animus is a relevant factor, but not essential or prerequisite to finding alter ego status. Id. at 581; see also NLRB v. Fullerton Transfer Storage, Inc., 910 F.2d 331, 337 (6th Cir. 1990) ("Though intent to thwart a board order or statutory requirement is an important criteria, this Circuit has not required such a showing of employer intent . . . ."); Goodman Piping Prods., Inc. v. NLRB, 741 F.2d 10, 12 (2d Cir. 1984) ("[T]he cases show that anti-union animus may be germane . . . or even a sufficient basis for imposing alter ego status . . . they do not establish that anti-union motivation is necessary."). "[A]lter ego analysis should be flexible," and no single factor "should become a prerequisite to imposition of alter ego status; rather, all the relevant factors must be considered together." Allcoast, 780 F.2d at 581-82. "In order to effectuate federal labor policies, the courts . . . have applied . . . the alter ego doctrine in a more relaxed, less exacting fashion than would be required under federal common law." Fullerton Transfer, 910 F.2d at 336.
In light of the flexible approach to alter ego analysis, I must deny both parties' summary judgment motions. Based on the evidence presented, a reasonable finder of fact could find that neither side has satisfied its burden. Both parties have presented evidence that would tend establish the existence or nonexistence of each factor. A material issue, thus, exists regarding each factor. A review of each element and the evidence presented follows.
I. Management
It is undisputed that the owners of Deke, Amy Frey and Marlene Baer, have limited involvement in the management of Deke. Additionally, neither Amy Frey nor Marlene Baer has ever had any involvement in the management of S.E.A.
It also undisputed that Ed Baer manages S.E.A. and has little involvement in managing Deke. He helps out with the bookkeeping and handles the management of Deke when Allen Frey is on vacation.
Since Deke's formation, it is undisputed that Allen Frey has managed that entity. The parties, however, dispute over the extent of Allen Frey's managerial role in S.E.A. prior to formation of Deke. NOA asserts that Allen Frey's managerial role in S.E.A., before the formation of Deke, is substantially identical to his current managerial role with Deke. NOA cites Allen Frey's deposition as evidence of his involvement in the day-to-day management and larger decision making of S.E.A., including job-site foreman, sales, personnel decisions, bidding, and bookkeeping. (Allen Frey Dep. at 12, 21).
S.E.A., however, asserts that Allen Frey's managerial role at S.E.A., prior to Deke, was much more limited. Citing the same deposition, S.E.A. describes Allen Frey's role at S.E.A. as restricted to job-site foreman and minimal help in sales, bookkeeping, and personnel decisions.
A material issue, thus, exists regarding the similarity between Allen Frey's current managerial role at Deke and his prior role at S.E.A. In other words, a material issue exists whether Deke and S.E.A. have shared the same management.
II. Business Purpose
It is undisputed that prior to the formation of Deke, part of S.E.A.'s business was erection of steel buildings, and that after the formation of Deke, S.E.A. ceased erecting steel buildings. Also, it is undisputed that Deke is involved almost exclusively in the erection of steel buildings. Therefore, it is undisputed that S.E.A. formerly had, and Deke presently has, the business purpose of erecting steel buildings.
It is undisputed, however, that prior to formation of Deke, S.E.A. was involved in the buying and selling of steel buildings while Deke currently is involved almost exclusively in the erection of steel buildings. Thus, a portion of S.E.A.'s past business purpose, the buying and selling of steel buildings, is not shared by Deke, and, therefore, a material issue exists regarding this factor.
III. Operation and Equipment
Both S.E.A. and Deke lease office space in the same building. While S.E.A. and Deke have separate and independent lease agreements, the evidence is unclear whether the two companies share the same office space. It is undisputed that S.E.A. and Deke share the same phone line, fax machine, and coffee maker.
The building is owned by Pettisville Main Street Properties which is owned entirely by Ed Baer, Marlene Baer, Allen Frey, and Amy Frey.
The companies, however, do not share the same computer or other office equipment. Further, S.E.A. and Deke do not share construction equipment or vehicles, and Deke did not acquire its construction equipment or vehicles from S.E.A.
IV. Customers
In his deposition, Ed Baer testified that Deke erects eighty percent of the buildings that S.E.A. sells. Allen Frey placed that percentage at forty to fifty. Allen Frey also testified that S.E.A. customers represent only approximately ten to fifteen percent of Deke's total business. Regardless, S.E.A. shares some amount of its customers with Deke, and it should be left for trial to determine if this amount of sharing is sufficient to establish this factor.
V. Supervision
Currently, the supervision of work at S.E.A. and Deke are separate. Ed Baer runs S.E.A., which is essentially a one-man operation at this point, and Deke employs two job-site foremen to supervise its work. Of those two, however, one was employed formally by S.E.A. as a job-site foreman, while the other was not. Additionally, Allen Frey supervises the work at Deke and supervised work at S.E.A. Thus, a material issue exists whether S.E.A. and Deke have shared enough of the same supervision to establish this factor.
VI. Common Ownership
Allen Frey and Ed Baer own equal shares in S.E.A., and Amy Frey and Marlene Baer own equal shares of Deke. S.E.A. argues that this arrangement constitutes different ownership for alter ego analysis purposes, despite the relationship between the owners of the two companies. In light of the circumstances surrounding the ownership of Deke, I disagree.
In establishing common ownership, ownership by members of the same family may be considered. See Centeral States Southeast Southwest Areas Pension Fund, 902 F.2d 593, 597 (7th Cir. 1990); J.M. Tanaka v. NLRB, 675 F.2d 1029, 1034-35 (9th Cir. 1982) (relying in part upon ownership of businesses by members of the same family); Pipe Fitters Union Local No. 392 v. Aggressive Piping, Corp., 841 F. Supp. 224, 227 (S.D.Ohio 1991) ("With respect to common ownership, the Court may consider if both businesses are solely owned by members of the same family, and the nature of the ownership."); Goldin-Feldman, Inc., 295 N.L.R.B. 359 (1989) ("The Board considers that the ownership test has been met if members of the same family have stock in the two corporations."); Crawford Door Sales, 226 N.L.R.B. 1144 (1976).
Amy Frey and Marlene Baer, sole owners of Deke, are married to Allen Frey and Ed Baer, sole owners of S.E.A. Furthermore, while Amy Frey and Marlene Baer are the owners and officers of Deke, neither receives any income from Deke nor participates substantially in its management or operation. Amy Frey advises Allen Frey on employee issues and Marlene occasionally gets office supplies, but neither works in the office on a regular basis. Ed Baer and Allen Frey, however, both receive a $2000 per week salary from Deke, despite the fact that Ed Baer has no involvement in Deke beyond helping with some bookkeeping.
In light of the circumstances surrounding the ownership of Deke, it appears that S.E.A. and Deke share the same ownership.
VII. Intent to evade obligations under the CBA
The Sixth Circuit has not found intent to evade labor law obligations or anti-union animus a prerequisite to a determination of alter ego status. Rather, it is a factor to be considered along with all the other factors articulated by the court. In this case, both parties have presented evidence that would tend to establish the existence or nonexistence of an intent to avoid the CBA.
Ed Baer, co-owner of S.E.A. and one of the parties involved in the formation of Deke, testified that part of the reason for forming Deke was to avoid obligations S.E.A. had under the CBA. Additionally, NOA points to the fact that the work S.E.A. quit performing and Deke exclusively performs, erecting steel buildings, is precisely the type of work covered under the CBA.
In his deposition, Ed Baer stated "it was because of this collective bargaining agreement that we quit erecting buildings." (Ed Baer Dep. at 9).
Conversely, S.E.A. cites the depositions of the other parties involved in the formation of Deke — Allen Frey, Amy Frey, and Marlene Baer. These individuals cite four reasons motivating the formation of Deke: 1) to capture a greater portion of the market for erecting steel buildings; 2) to split the liability for the sale and erection of a steel building between two separate companies; 3) greater financial security for Amy Frey and Marlene Baer and possible minority contracting opportunities; and 4) Ed Baer's dislike of employment matters.
In light of the conflicting depositions, a material issue of fact regarding the motive behind the formation of Deke exists.
In sum, the issue of Deke's alter ego status is one that requires determination at trial. Therefore, I shall deny both motions for summary judgment.
CONCLUSION
For the foregoing reasons, it is hereby
ORDERED THAT
1. NOA's and Deke's motions for summary judgment be, and they hereby are, denied; and
2. The Clerk shall set this case forthwith for a scheduling conference.
So ordered.