Opinion
CIVIL NO.: 97-CV-75019-DT
June 15, 2001
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On March 7, 2001, the National Labor Relations Board [the NLRB or the Board], applied for a postjudgment writ of garnishment, pursuant to the Federal Debt Collection Procedure Act of 1990 [the FPCPA], 28 U.S.C. § 3002 et seq., seeking to garnish funds owed by Dan's Excavating, Inc. to Kelly Painting Company. The writ was issued, and in accordance with the provisions of 28 U.S.C. § 3202(b), Victoria Maynard. d/b/a Kelly Painting Company, was notified of her right to a hearing to contest the writ on the issues of whether the garnished funds were exempt or on the basis that she did not owe the money to the NLRB. On March 12, 2001 Maynard requested a hearing, asking that the court vacate the writ and enjoin the NLRB from further garnishments. An evidentiary hearing was held on April 23, 2001, and the matter is now ready for decision.
The money is owed to Kelly Painting pursuant to a contract under which Kelly Painting acted as a subcontractor to Dan's Excavating for building demolition, parking lot construction and related work on the Blue Water Bridge Plaza, See NLRB's Reply, Ex. 10.
II. BACKGROUND
On June 30, 1993, pursuant to the provisions of section 10(b) of the National Labor Relations Act [the NLRA or the Act], 29 U.S.C. § 160(b), and based upon a series of charges filed on May 7, June 22, and June 30, 1993, by the International Brotherhood of Painters and Allied Trades, Painters Local 1474, AFL-CIO [the Union], the NLRB regional director issued a complaint alleging that MV Painting, Inc., Piper Painting, Inc., and Victor [Vic] Piper, an individual, a single integrated enterprise and single employer [hereinafter the Respondent) had engaged in unfair labor practices in violation of the Act. After the complaint was issued, the union filed another series of charges on July 1, July 12, July 19 and July 29, 1993. On August 6, 1993, the NLRB regional director issued a consolidated complaint, alleging additional Violations of the Act. A hearing was held before Administrative Law Judge [ALJ] George F. McInerny on October 27, 1993.
Vic Piper was the sole shareholder and chief executive officer of MV Painting, Inc. and Piper Painting, Inc. These companies ceased operation in December, 1992 and June, 1993, respectively.
On April 24, 1994, the ALJ issued a decision finding that Respondent was a single integrated enterprise and a single employer and that it had unlawfully discharged and otherwise discriminated against various employees and had committed other violations of the Act. NLRB's Memorandum, filed on May 7, 2001. Ex. I, p. 11. He ordered Respondent, among other things, to reinstate the unlawfully discharged individuals and make whole the named employees for any losses suffered as a result of the unfair labor practices which had been committed. Id. at p. 22.
On June 27, 1994, alter no exceptions were filed, the Board issued an order, adopting the findings and conclusions of the ALJ. Id., at Ex. 2. That decision and order was enforced in a judgment entered by the United States Court of Appeals for the Sixth Circuit on February 3, 1995, Id. at Ex. 3.
On March 18, 1996, the NLRB regional director issued a compliance specification alleging that Michael [Mike] B. Piper, d/b/a Mike Piper Painting, was liable for the amount of the judgment as an alter ego of Respondent. On September 5, 1996, the Board issued a second decision and order, finding that Mike Piper Painting was established by Respondent as a subordinate instrument to and a disguised continuation of MV Painting, Inc., Piper Painting, Inc., and Vic Piper, an individual and a single employer. Id., at Ex. 4. The Board ordered Respondent to pay backpay in the total amount of $354,784 plus interest. The Sixth Circuit enforced this order in a supplemental judgment entered on February 27, 1997. Id. at Ex. 5. To date, Respondent has not paid the backpay award.
Mike Piper is the son of Vic Piper.
On September 30, 1997, the Board registered the Sixth Circuit's February 27, 1997 supplemental judgment in this court pursuant to 28 U.S.C. § 1963. Based upon an application by the Board under the FDCPA, the court issued various writs of garnishment upon the assets of Respondent. On November 12, 1997, pursuant to action undertaken by the Board, the court entered an order approving the Board's partial release of garnishment as to Mike Piper because he bad obtained a discharge in bankruptcy.
As indicated, on March 7, 2001, the NLRB obtained writ of garnishment upon the assets of Kelly Painting as the alleged alter ego/successor of Respondent. On March 12, 2001, Victoria Maynard, who is the daughter of Vic Piper, requested a hearing to quash the writ, arguing that Kelly Painting is not the alter ego of Respondent.
On March 30, 2001, Vic Piper filed for personal bankruptcy, the effect of which, Maynard argues, operates to stay this proceeding. At the conclusion of the April 23, 2001 evidentiary hearing, the parties were directed to submit supplemental briefs on the following issues: (1) whether Kelly Painting is an alter ego of Respondent and therefore liable for the backpay award; and (2) the effect, if any, of Vic Piper's bankruptcy filing on this garnishment proceeding.
III. ANALYSIS
A. Alter Ego Doctrine
The alter ego doctrine was first recognized by the Supreme Court in Southport Petroleum Co. v. NLRB, 315 U.S. 100, 106 (1942). The doctrine "is most commonly used in labor cases to bind a new employer that continues the operations of an old employer in those cases where the new employer is `merely a disguised continuance of the old employer.'" NLRB v. Fullerton Transfer Storage Ltd., 910 F.2d 331, 336 (6th Cir. 1990) (citing Southport Petroleum Co., 315 U.S. at 106); see also Howard Johnson Co. v. Detroit Local Joint Executive Bd., 417 U.S. 249, 259 n. 5 (1974). An alter ego relationship is established when there is a "mere technical change in the structure or identity of the [old] employing entity, frequently to avoid the effect of the labor laws, without any substantial change in its ownership or management." Howard Johnson Co., 427 U.S. at 259 n. 5.
A determination of alter ego status is a question of fact. Southern Petroleum, 315 U.S. at 106. The Sixth Circuit has identified relevant factors to consider in making that determination, including "whether the two enterprises have substantially identical management, business purpose, operation, equipment, customers, supervision and ownership." NLRB v. Allcoast Transfer, Inc., 780 F.2d 576, 579 (6th Cir. 1986) (citation omitted). The Sixth Circuit in Allcoast Transfer further found that intent to evade obligations under the Act is not essential to imposition of alter ego status and that "the essential inquiry under alter ego analysis is `[w]hether there was a bona fide discontinuance and title change of ownership . . . or merely a disguised continuance of the old employer.'" Id. at 581 (citing Southport Petroleum Co., 315 U.S. at 106). An alter ego analysis is flexible; all relevant factors must be considered, but not all factors need be present. Allcoast Transfer, 780 P.2d at 581-582; see also A P Brush Mfg. Corp. v. NLRB, 140 F.3d 216, 219 (2nd Cir. 1998) (in an alter ego analysis, "[n]o single factor, either by its presence or its absence, is dispositive").
Applying the factors outlined in Allcoast Transfer, I find that Kelly Painting Company is the alter ego of MV Painting, Inc. and Piper Painting, Inc. (collectively, Piper Painting]. The evidence, as a whole, demonstrates that Vic Piper exercises substantial control over the day-to-day operations of Kelly Painting. For example, on October 4, 2000, Vic Piper completed a supplier qualification statement as an "authorized agent" of Kelly Painting, in which he indicated that Kelly Painting had been in business 27 years, that the company had operated under its present name for ten years, and that the company had formerly operated under the name Piper Painting, Inc. NLRB's Memorandum, Ex. G1. In addition, a September 29, 2000 information sheet for the company lists Vic Piper as the contact person. It also lists the jobs and references that were performed and used by Piper Painting. In December, 2000, Vic Piper completed another supplier qualification statement, again indicating that Kelly Painting had been in business 27 years and had formerly operated as Piper Painting, Inc. See NLRB's Memorandum, Ex. G2. However, on this statement, Vic Piper stated that Kelly Painting bad been operating under its present name for only six years. In addition. "Piper Painting. Inc." was rhandwritten on the bottom of Kelly Painting's fax cover sheet. By these acts, Vic Piper has acknowledged that Kelly Painting was the continuation of Piper Painting.
Maynard testified that she invested in Kelly Painting on February 15, 2000. Evid. Hrg., p. 28. Upon further questioning, she testified that Kelly Painting had previously been owned by her sister. Id. at p. 43.
In an effort to diminish the significance of this evidence, Maynard asserts that she is the sole investor and owner of Kelly Painting, that Mike Piper manages the company, and that Vic Piper does not get paid for any services he performs for the company. She testified at the evidentiary hearing that Vic Piper is retired and is collecting social security disability benefits. Evid. Hrg., pp. 30-31. She states in her brief that Vic Piper spends only minimal amounts of time at the offices of Kelly Painting, which are located within the family's residence. Maynard further states that her father's assistance is "sparse" and limited to "occasionally helping with paperwork' and that he is only assisting his children because of his experience in running a commercial painting business. Maynard argues that these facts preclude a finding of alter ego status. I disagree.
Maynard also states that she never was involved with the management of the old company. Maynard Brief, p. 4. To the contrary, in a 1992 Michigan Annual Report for Profit Corporations, Vic Piper listed Victoria Piper (now Victoria Maynard) as the president of Piper Painting, Inc. See NLRB Reply, Ex. 11.
While Maynard contends that she is the sole owner of Kelly Painting, her testimony at the hearing revealed that she knows nothing about the daily operation of Kelly Painting. Moreover, the documents submitted by the NLRB clearly show that Vic Piper has held Kelly Painting out to the public as if it was a continuation of Piper Painting. While common ownership is only one factor to be considered; it is not a necessary prerequisite to a finding of alter ego status. See J.M. Tanaka Construction, Inc. v. NLRB, 675 F.2d 1029, 1035 (9th Cir. 1982). In NLRB v. Omnitest Inspection Services, Inc., 937 F.2d 112, 119-20 (3rd Cir. 1991), the Third Circuit held that "it is actual control that highlights whether the change in formal ownership between the old and now employers is the type of `mere technical change in the structure or identity of an employer that is proscribed by the alter ego doctrine.'" As I found at the evidentiaiy hearing, Vic Piper maintains control over Kelly Painting's operations by submitting bids, signing documents as the authorized agent, and filling out the paperwork. Evid. Hrg., p. 45. In fact, Vic Piper signed the contract with Dan's Excavating for the Blue Water Bridge Plaza project, the funds from which are the subject of this garnishment proceeding. NLRB's Reply, Ex. 10. While Maynard states that these documents were prepared by her father without her knowledge (or her brother's knowledge), she admitted at the hearing that Vic Piper does all of the bidding. Id. at p. 40.
In addition, the court notes that Piper Painting performed work on the Blue Water Bridge Plaza in 1991, 1992 and 1993. See NLRB's Reply, Ex. 9.
Consideration of the remaining factors also favors a finding of alter ego status. While acknowledging that the two companies have similar business' purposes and operate in the same location, Maynard argues that these factors cannot be used against her because it is a family-owned business that operates out of the family residence. This argument is not persuasive. Although the same location and business purpose do not, by themselves, establish that Kelly Painting is an alter ego, they clearly provide support for that conclusion. Maynard also notes that Kelly Painting uses different equipment and has different customers that Piper Painting, arguing that these differences support a finding that Kelly Painting is not the alter ego of Piper Painting. These insignificant differences, however, are not compelling, particularly in light of the manner in which Kelly Painting utilizes its previous incarnation as Piper Painting. See Lihli Fashions Corp. v. NLRB, 80 F.3d 743, 747 (2nd Cir. 1996) (stating that no one factor is controlling and every factor need not be present to determine that a company is an alter ego). Based on a totality of the factors and in light of all the evidence, I conclude that Kelly Painting is the disguised continuance or alter ego of Piper Painting and therefore is liable to the NLRB for the back pay award. See Howard Johnson Co., 417 U.S. at 259 n. 5 (the alter ego is "subject to all the legal and contractual obligations of the predecessor").
Maynard testified that she moved out of the family residence in July, 2000. Evid. Hrg., p. 34.
B. The Effect of Vic Piper's Bankruptcy Filing
At the hearing, counsel for Maynard informed the court that Vic Piper had filed for bankruptcy. Maynard now argues that the bankruptcy filing operates as a stay on the continuation of this garnishment proceeding. See 11 U.S.C. § 362(a). Maynard claims that the bankruptcy stay applies to Vic Piper and any entities of Vic Piper. She further claims that the question of whether the automatic stay applies to this proceeding should be determined by the bankruptcy court.
On the filing of a bankruptcy petition, § 362(a) automatically operates to stay "the commencement or continuation . . . of a judicial . . . proceeding against the debtor," 11 U.S.C. § 362(a)(1).
In NLRB v. Edward Cooper Painting, Inc., 804 F.2d 934 (6th Cir. 1986), the Sixth Circuit held that the bankruptcy courts do not have exclusive jurisdiction to determine the applicability of the automatic stay. The court stated:
the court in which the litigation claimed to be stayed is pending has jurisdiction to determine not only its own jurisdiction but also the more precise question whether the proceeding before it is subject to the automatic stay.Id. at 939 (quoting In re Baldwin-United Corp., Litigation, 765 F.2d 343, 347 (2nd Cir. 1985)). See also NLRB v. Sawulski, 158 B.R. 971, 975 (E.D.Mich. 1993). Accordingly, this court has jurisdiction to determine whether this proceeding is subject to the automatic stay, not the bankruptcy court.
Although the court has not been provided with a copy of Vic Piper's bankruptcy petition, the parties seem to agree that the petition was filed on behalf of Vic Piper as an individual. Because the petition was filed on behalf Vic Piper individually, only he receives the benefit of the protection of the automatic stay. Here, the NLRB seeks garnishment of the assets of Kelly Painting as the alter ego of Piper Painting, the corporate entity, not Vic Piper the individual. Therefore, contrary to Maynard's claim that the stay applies to "any entities of Vic Piper," the assets of Kelly Painting are not protected by the bankruptcy petition filed by Vic Piper as an individual. See e.g., NLRB v. E.D.P, Medical Computer Systems, Inc., 6 F.3d 951, 957 (2nd Cir. 1993); In re Morgan, 109 B.R. 297, 301 (W.D. Tenn. 1989) (citing Lynch v. Johns-Manville Sales Corp., 710 F.2d 1194 (6th Cir. 1983)). Therefore, this proceeding is not affected by Vic Piper's bankruptcy.
Contrary to the NLRB's position, if it were determined that the Vic Piper's bankruptcy encompassed Kelly Painting, the garnishment proceeding would be stayed, The enforcement of a money judgment is not deemed to be an action to enforce governmental police or regulatory powers, which is exempt from the automatic stay provisions of the 11 U.S.C. § 362. See 11 U.S.C. § 362(b)(5); see also Edward Cooper, 804 F.2d at 943; E.D.P. Medical Computer Systems, 6 F.3d at 954; Sawulski, 158 B.R. at 978.
For the reasons stated above, the request by Victoria Maynard, an individual d/b/a Kelly Painting Company, to quash the writ is DENIED. The parties are hereby informed that any objections to this order must be filed with the district court within ten days after entry, pursuant to Rule 72(a), Federal Rules of Civil Procedure.