Opinion
Civil Action Number: SA-03-CA-290-XR.
March 9, 2006
FACT FINDINGS AND CONCLUSIONS OF LAW
This case was tried before the Court on September 12, 13, and 14, 2005. Plaintiff Sheet Metal Workers International Association Local Union No. 67 brought this suit against three Defendants, Todd-Ford Management Co. ("Management"), Todd-Ford Sheet Metal, Inc. ("Sheet Metal"), and Todd-Ford, Inc. ("Inc."), alleging that these Defendants are alter egos and are liable under section 301(a) of the Labor Management Relations Act ("LMRA") for breach of Article II, Section 1 of the collective bargaining agreement ("CBA") signed by Sheet Metal and the Union and under the Employee Retirement Income Security Act ("ERISA") for failing to make various contributions required by Article VIII of the CBA.
Plaintiff Union and Defendant Sheet Metal are signatories to the CBA. Defendants Inc. and Management are not signatories. Inc. and Sheet Metal are wholly owned subsidiaries of Management, a holding company. Plaintiff alleges that Inc. violated the CBA by subcontracting sheet metal work to non-union firms, and that all three defendants are jointly liable. Plaintiff originally alleged that Defendants were both alter egos and a "single employer," but Plaintiffs abandoned the "single employer" theory and proceeded to trial on only the alter ego theory. Plaintiff's Closing Brief at 4; Tr. 8, 19. Plaintiff asserts that the Todd-Ford companies' assertion that they are completely separate, independent companies is not a true reflection of how the Todd-Ford Companies actually conduct themselves, and they have intentionally deceived Plaintiff to forestall any action by Plaintiff when Inc. diverts bargaining unit work away from Plaintiff's members by subcontracting with non-union firms. Tr. 14 (Plaintiff's opening statement). Defendants deny they are alter egos and argue alternatively that, even if they are alter egos, Plaintiff Union released Inc. from the CBA in 1990 and cannot now assert claims against it for breach of contract.
After careful consideration, the Court finds that judgment should be entered in favor of Defendants and issues its facts findings and conclusions of law pursuant to Rule 52(a).
Conclusions of Law
1. This Court has jurisdiction to examine alleged violations of collective bargaining agreements pursuant to section 301(a) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185(a). A section 301 claim must satisfy three requirements: (1) a claim of violation of (2) a contract (3) between an employer and a labor organization. Carpenters Local Union No. 1846 v. Pratt-Farnsworth, Inc., 690 F.2d 489, 500, 502 (5th Cir. 1982).
2. Whether two companies are alter egos is a question of fact answered through two inquiries. J. Vallery Elec., Inc. v. NLRB, 337 F.3d 446, 451 (5th Cir. 2003). First, the Court must determine "whether the two enterprises have substantially identical management, business purpose, operation, equipment, customers, supervision, and ownership." Id. Second, the Court must gauge whether there was an unlawful motive behind the creation of the new business entity, determining whether there was a "disguised continuance" or "attempt to avoid the obligations of [an existing] collective bargaining agreement through a sham transaction or technical change in operations." Id. An unlawful motive is an objective of escaping further dealings with the Union or to avoid obligations under the NLRA. See, e.g., Crossroads Elec., 343 NLRB No. 112 (2004). The Board does not require the presence of each factor to conclude that alter ego status should be applied. Stardyne, Inc. v. NLRB, 41 F.3d 141, 146 (7th Cir. 1994).
3. Whether companies are alter egos requires consideration of numerous factors and often presents a close question. NLRB v. Tricor Prods., Inc., 636 F.2d 266, 269 (10th Cir. 1980).
4. The National Labor Relations Board ("the Board") has rejected the position that an alter ego finding requires a finding that the defendant had an unlawful motive to avoid its obligations under the NLRA. Alexander Painting, Inc. and Silver Palette, Inc. and Int'l Union of Painters Allied Traders, 344 NLRB No. 157 (2005); Liberty Source W, LLC and/or Trafford Distrib. Ctr., 344 NLRB No. 137 (2005); see also Fallon-Williams, Inc., 336 NLRB 602, 603 (2001) ("[T]he Board has consistently held that such a motive [to avoid obligations under the Act] is not necessary for finding alter ego status.").
5. Most Circuit Courts of Appeals have also held that, although motive is a relevant factor, the question of motive is not controlling. See NLRB v. Hospital San Rafael, Inc., 42 F.3d 45, 51 (1st Cir. 1994) (noting that the view that wrongful motive is not required is shared by most circuits); Goodman Piping Prods. v. NLRB, 741 F.2d 10, 12 (2d Cir. 1984) (finding the argument that the Board must find anti-union animus or an intent to evade union obligations before it can impose alter ego status "unpersuasive" and noting that the cases show that anti-union union animus may be germane or even sufficient, but it is not necessary); Brown v. Sandimo Materials, 250 F.3d 120, 128 n. 3 (2d Cir. 2001) (same); Stardyne, Inc. v. NLRB, 41 F.3d 141, 148 (3d Cir. 1994) (deferring to NLRB's approach that unlawful motive is not a prerequisite to an alter ego finding); NLRB v. Allcoast Transfer, Inc., 780 F.2d 576, 581 (6th Cir. 1986) (concluding that a finding of employer intent is not essential or prerequisite to imposition of alter ego status); NLRB v. Tricor Prods., 636 F.2d 266, 270 (10th Cir. 1980) (holding that evidence of anti-union sentiment by an employer occurring either before or after the change in the structure of the business is germane); Fugazy Continental Corp. v. NLRB, 725 F.2d 1416, 1419 (D.C. Cir. 1984) (noting that the Board will give substantial weight to evidence that the motive for the transaction was to evade duties under the NLRA or to escape the reach of the Board's remedies). See also Alkire v. NLRB, 716 F.2d 1014, 1019-20 (4th Cir. 1983) (focusing on whether the transfer resulted in an expected or reasonably foreseeable benefit to the old employer related to the elimination of its labor obligations). But see Iowa Express Distribution, Inc. v. NLRB, 739 F.2d 1305, 1311 (8th Cir. 1984) (holding that unlawful motive is a critical inquiry in an alter ego analysis).
6. The Fifth Circuit has not expressly stated that unlawful motive is a necessary requirement for finding alter ego status, and this Court concludes it is not. However, the Fifth Circuit's language in J. Vallery that the alter ego inquiry is a two-step inquiry and, as the second step, the Court "must gauge whether there was an unlawful motive behind the creation of the new business entity" as well as its language in Pratt-Farnsworth that, "in deciding whether a company is an alter ego, the focus is on the existence of a disguised continuance or an attempt to avoid the obligations of a CBA through a sham transaction or technical change in operations," Pratt-Farnsworth, 690 F.2d at 508, suggest that, in the Fifth Circuit the motive factor, though not controlling, must be given substantial weight in the alter ego determination. See, e.g., Fugazy Cont. Corp. v. NLRB, 725 F.2d 1416, 1420 (D.C. Cir. 1984) ("In addition, the Board will give substantial weight to evidence that the motive for the transaction was to evade statutory and contractual duties under the NLRA or to escape the reach of the Board's remedies.").
The Board itself states that the motive factor "must be considered," but does not consider the motive factor to be dispositive. See Advance Elec., 268 NLRB 1001 (1984) ("Other factors which must be considered in determining whether an alter ego status is present in a given case include `whether the purpose behind the creation of the alleged alter ego was legitimate or whether, instead, its purpose was to evade responsibilities under the Act.'").
7. The inquiry whether the defendant had an unlawful motive is not limited to the time period surrounding the creation of the new company or companies. In Crossroads Electric, 343 NLRB No. 112 (2004), the respondent argued "that alter ego status is to be determined based on developments which took place at the time the alter ego was formed, not what may have happened at a later date." The ALJ's order, adopted by the Board, stated that "the Board does not hold that the fact finder is limited to the very beginning of a new entity. . . . Such a rule would make avoidance of obligations under the Act a mere matter of waiting a short hiatus before resuming full operations." The order cited Blue White Cabs, 291 NLRB 1047, 1048 (1988) as "the applicable precedent." In Blue White Cabs, the Board held that the alter ego inquiry should not focus on the transitional stage but the time at which the company had been fully phased in to carry out its intended purpose, and thus although the new company appeared to be an alter ego during the transitional stage, once fully phased in, it was not an alter ego. Further, the NLRB decision in Alexander Painting found alter ego, despite the fact that the defendant "may have had (and probably did have) the lawful motive of operating under the Union's market recovery program when he created [the alter ego company] in January 2001" but he "abandoned that objective" when in November 2001 he transferred the stock in the alter ego company solely to his wife's name without any consideration. Thus, the Board held, "the transfer was less than an arm's length transaction and suggests the nefarious motive adopted by [the defendant] at some point after May 1, 2001, when the 2001 contract became effective." Last, in Advance Electric, 268 NLRB at 1004, the Board looked to the purpose behind the "activation" of Beacon in December 1982 rather than its incorporation in 1980 to determine whether there was an improper motive. Though Beacon was incorporated in 1980 for "tax purposes," it remained relatively dormant until 1982, when it was activated "for the purpose of eliminating the high costs associated with operating Advance as a union contractor." The Board found that this was an unlawful motive.
8. Familial control constitutes common ownership and control. NLRB v. Dane County Dairy, 795 F.2d 1313, 1322 (7th Cir. 1986) (cited with approval by J. Vallery, 337 F.3d at 451 n. 16); see also Johnson v. Crown Enters., Inc., 398 F.3d 339, 344 n. 5 (5th Cir. 2005) (noting that the Fifth Circuit has cited with approval cases indicating that family ownership is common ownership); Crawford Door Sales Co., 226 NLRB 1144 (1976) (finding that ownership and control in two enterprises were substantially identical when both were wholly owned by members of the same family and never lost their character as closed corporations).
9. If a district court finds that the two entities are alter egos, there must be a favorable decision as to the appropriateness of the bargaining unit consisting of the employees in both companies before the non-signatory entity would be bound by the CBA. Pratt-Farnsworth, 690 F.2d at 510. In making this determination, the district court may make the limited determination of whether the stipulated unit is repugnant to any policy embodied in the NLRA. Id. at 509.
Fact Findings
1. Todd-Ford was formed in 1952 as a limited partnership between John Ford and John Todd. The limited partnership performed primarily residential air conditioning work.
2. Todd-Ford began as a residential air conditioning company, and then moved into commercial work in the 1950's and stopped doing residential work around the same time. The business began concentrating in the commercial construction market in the late 1950's.
3. The limited partnership was incorporated in 1962. PX-15. The new business was named Todd-Ford, Inc. Its Articles of Incorporation state that the purposes for which the corporation is organized are "to engage in the manufacturing and construction business including contracting and subcontracting with the right to buy, sell and repair heating, cooling, electrical equipment, plumbing and piping therefor, as well as the installation thereof." PX-16. Since 1962, Todd-Ford has been a business owned and run by the Ford family, consisting of John and Jean Ford and their children, Jon, Roger, and Lisabeth. John Ford's wife was Jean Sisk Ford, who died in 1996. Thomas Ford is Jon Ford's eldest son.
4. Jon Ford began working for Todd-Ford full time in 1966. He became Vice President in 1967. Tr. 186. Jon Ford held the positions of Vice President, Executive Vice President, and President of Inc. in the 1970's and served as President of Inc. until April 30, 2003. Thereafter, he became the President and CEO of Management because, according to Jon, John Ford retired.
5. Lisabeth Ford started working for Todd-Ford in 1983 learning accounting and she continued to do accounting work throughout her career with Todd-Ford. Lisabeth Ford was Vice President of Sheet Metal until 2003, when she became the Secretary/Treasurer. Lisabeth Ford had no official duties as Vice President of Sheet Metal and did not know what her duties were as Secretary/Treasurer of Sheet Metal. Lisabeth Ford stopped going to work in April 2004 but did not resign until September 2004. John and Jon Ford set Lisabeth Ford's salary. She asked her father and Roger for a raise. Lisabeth Ford never set her own salary.
6. Roger Ford worked for Todd-Ford, Inc. from 1979 to 1985 as a project manager overseeing plumbers, pipefitters, and sheet metal workers. In 1985, Jon Ford entered Roger's office and told him that Todd-Ford, Inc. was becoming Todd-Ford, Inc., Todd-Ford Management, and Todd-Ford Sheet Metal and that he was now the President of Todd-Ford Sheet Metal, Inc. Tr. 317.
7. The current collective bargaining agreement at issue in this case is between MCA-SMACNA (Mechanical Contractors Association — Sheet Metal and Air Conditioning Contractors National Association, Inc.) of San Antonio, Inc. and Sheet Metal Workers International Association Local Union No. 67 (Plaintiff) and is effective April 1, 2001 to March 31, 2005. PX-34. Article II, Section 1 of the Collective Bargaining Agreement concerns subcontracting and states that "No employer shall subcontract or assign any of the work described herein which is to be performed at a job site to any contractor, subcontractor or other person or party who fails to agree in writing to comply with the conditions of employment contained herein including, without limitations, those relating to Union security, rates of pay and working conditions, hiring and other matters covered hereby for the duration of the project." PX-34.
8. Todd-Ford, Inc. reorganized in August 1985. PX-18. Under the Plan and Agreement of Reorganization, Todd-Ford Management purchased all of the outstanding shares of capital stock in Todd-Ford, Inc. and Inc. became a wholly owned subsidiary of Management. PX-18. Todd-Ford Sheet Metal was incorporated on July 30, 1985. PX-12. Sheet Metal's Articles of Incorporation state that the purpose of the corporation is "to engaged in the business of fabrication and installation of sheet metal work." PX-13; see also Tr. 317 (Roger Ford testified that Sheet Metal is in the business of fabricating and installing duct work systems and their appurtenances in an HVAC system.) The same workers who had been represented by Local 67 and employed by Inc. became employees of Sheet Metal. Tr. 320.
9. Roger Ford was named the sole director of Sheet Metal, and the officers were Roger (President and Secretary/Treasurer) and Lisabeth (Vice President). PX-13. Sheet Metals' bylaws state that the President shall be CEO and have supervision of the affairs of the corporation and shall have general and active control of all its business. PX-14. Roger has been President of Sheet Metal since its creation and his duties, responsibilities, and authority have not changed since its creation. Tr. 319. Roger oversees the securing and performance of work, procurement of materials, hires employees, and sometimes is part of the collective bargaining negotiating committee. Tr. 320.
10. Due to the corporate reorganization, Inc. sent the Plaintiff Union a letter in 1985 asking that Inc. be released from the Collective Bargaining Agreement and that the Agreement be assigned to the newly formed Sheet Metal. The letter was signed by Jon Ford, as President of Todd-Ford, Inc. and addressed to SMWIA Local 67 (Plaintiff Union) to the attention of Robert Stringer. DX-1. Robert Stringer was the Union's business manager at that time. Tr. 193. The letter stated, "Gentlemen: Please be advised that effective August 1, 1985 we will assign our sheetmetal contract to a new company formed as Todd-Ford Sheetmetal. We therefore ask that Todd-Ford, Inc. be released from said contract as of that date. Thank you." DX-1. Jon and John Ford spoke with Stringer about the reorganization and assured him that the new sheet metal company would be a union sheet metal company and informed him that the new mechanical company (Inc.) would not be self-performing any sheet metal work, but would be subcontracting all its sheet metal work thereafter. Tr. 193, 247. Jon and John did not tell Stringer that Inc. would be subcontracting sheet metal work to nonsignatory subcontractors because, at that time there were no nonunion sheet metal companies and "the thought never even entered [their] minds." Tr.247, 249. Jon and John did tell Stringer that Inc. would be subcontracting sheet metal work going forward. Tr. 247, 249. Stringer did not sign the letter at the meeting but voiced no objection to the reorganization. Tr. 194. Over time, Jon Ford followed up about the letter because Inc. did not receive a signed copy of the letter until 1990.
11. Dickie Mangold signed the letter on the blank next to "Accepted by" on May 18, 1990. Ex. P-37. Dickie Mangold was the Union's business manager at that time. Tr. 194.
12. Sheet Metal acted in accordance with the CBA between 1985 and 1990, when Plaintiff Union signed the letter. Sheet Metal has abided by the CBA with Plaintiff Union since 1985. Tr. 322.
13. The purposes of the 1985 reorganization were to give Roger Ford his own business to run and to give the sheet metal operation a better chance to grow and prosper. Tr. 189.
14. Inc. retained its contract with the Plumbers and Pipefitters Local Union No. 142. Tr. 253.
15. Inc.'s field employees are plumbers and pipefitters who perform plumbing and pipefitting work. Inc. has no employees who perform sheet metal work for Inc.
16. Sheet Metal fabricates and installs sheet metal ductwork on large complicated commercial jobs.
17. Management purchased Jud Plumbing Heating, Inc. ("Jud") in 1991. PX-10. Jud Plumbing fabricated and installed sheet metal, but stopped doing both effective January 1, 1992. PX-38. Jud sent a letter to Plaintiff advising it that it was closing its sheetmetal activities and would assign its contract to Todd-Ford Sheet Metal, Inc. PX-38.
18. Michael O'Day first began working for Todd Ford when Todd Ford purchased Jud Plumbing in 1991. Jon Ford promoted Michael O'Day to Executive Vice President of Inc. after Inc. and Jud Plumbing merged in 1998. PX-10. As Executive Vice President, O'Day was in charge of field operations and was in charge of project managers from both Jud Plumbing and Inc. O'Day became the President of Inc. on May 1, 2003. He was also elected director of Inc. at that time. Tr. 278.
19. During the early to middle part of the 1990's, the San Antonio marketplace changed for mechanical contracting, and Inc. faced increased competition from different mechanical contractors, who were using non-union shops' sheet metal bids as part of their mechanical bids. Tr. 200-03. This caused Inc. to lose mechanical subcontracts to other mechanical contracting firms because Inc.'s bid to the general contractor on these projects was not the lowest bid.
20. Plaintiff filed a grievance against Jud and Sheet Metal in March 1994, arguing that Jud's subcontracting of work to B.G. Metals was in violation of Article II, Section 1 of the CBA. O'Day responded on behalf of Jud, Roger Ford responded on behalf of Sheet Metal, and John Ford responded on behalf of Management, all denying the charges. A hearing was held before the Joint Adjustment Board on April 21, 1994. The Minutes of the Joint Adjustment Board Hearing reflect that John Ford "stated that he was Todd/Ford Management and has no contracts with anyone; Jon Ford, Jr. is Todd/Ford, Inc. and has a contract with the Plumbers and Fitters Local #142; Roger Ford is Todd/Ford Sheet Metal and has a contract with Sheet Metal Workers' Local #67. He stated that he has nothing to do with their companies and they have nothing to do with his, they all take care of their own business." PX-38. On April 29, 1994, John Ford sent a letter to the Board regarding the Minutes. In the letter, he stated that his statements were not correctly reported in the minutes and that his explanation of the structure of Todd-Ford Management was as follows: "I am CEO and Board Chairman of Todd-Ford Management, which is a holding company with three (3) subsidiaries: Todd-Ford, Inc., Todd-Ford Sheetmetal, Inc., and Jud Plumbing Heating Co., Inc. which are separate corporations, each with their own group of officers and management personnel. Jon G. Ford is President of Todd-Ford, Inc., Mike O-Day is President of Jud Plumbing Heating Co., Inc. and Roger D. Ford is President of Todd-Ford Sheetmetal Co., Inc. They are each responsible for the operation and actions of their respective corporation." PX-38. Another hearing was held on August 2, 1994. The Board ultimately ruled that Jud was still a party to the CBA. PX-38.
21. In 1996, and continuing to date, Inc. has subcontracted sheet metal work to B.G. Metals, a sheet metal contractor that does not have a collective bargaining relationship with Local 67, as well as to other sheet metal firms that do have a collective bargaining relationship with Local 67. There is no evidence of any subcontracting by Inc. to a sheet metal firm not having an agreement with Local 67 until 1996.
22. Between April 16, 1996 and April 14, 2003, John Ford was the sole Director of Management; Jon Ford was the sole Director of Inc.; and Roger Ford and, at times Lisabeth Ford, were the Directors of Sheet Metal. O'Day was the sole Director of Jud Plumbing and Heating Company, Inc.
23. On April 15, 2003, John and Jon Ford became the Directors of Management. O'Day became the sole Director of Inc., and Roger Ford continued as Director of Sheet Metal without Lisabeth.
24. Jon Ford, by virtue of his position with Management, will be able to evaluate the performance of the Directors of Inc. and Sheet Metal.
25. Roger Ford does not set his own salary. Jon Ford, his brother, and John Ford, his father, set his salary. Roger Ford has asked his brother for a raise. Roger Ford has received possibly five bonuses over the years through a decision between his brother and father. Roger Ford has received four loans or advances on his salary. He received them by asking his brother Jon Ford. He received the money on a Management check.
26. O'Day has no ownership interest in Inc., Sheet Metal, or Management. O'Day does not set his own salary. Jon Ford sets it. Michael O'Day did not get a raise when he became President of Inc. Jon Ford gives O'Day raises in his salary. The last raise was in the Fall of 2004. Jon Ford has approved an advance on O'Day's salary upon O'Day's request. Although he is no longer President of Inc., Jon Ford still has final authority over what projects Inc. bids on. Tr. 420-23. O'Day brings in projects to be bid, but does not have control over the estimating department. Tr. 421. O'Day also does not have final say over which subcontractors Inc. awards bids to if his view conflicts with the competitive bid process. Tr. 424.
27. Todd-Ford was the first entity to use the term "mechanical contractor" in the San Antonio area. The names Todd-Ford, Inc. and Todd-Ford Mechanical Contractors can be used interchangeably but do not refer to either the Management or Sheet Metal companies. The term "Mechanical" is used to distinguish the company because it does the mechanical work that encompasses plumbing work, utility work, HVAC piping, sheet metal ductwork, controls, and insulation. This name shows the business world that the company provides a broad scope of services in the mechanical field. However, Todd-Ford, Inc. subcontracts out to other contractors the sheet metal ductwork, mechanical insulation, temperature controls, and test and balance. Tr. 414.
28. Martin Polka was hired by Jon Ford and began working for Management in 1989. Polka was the accountant for all three Defendants during the period at issue herein. Polka performs accounting oversight and finance functions, and prepares financial documents for Inc. and Sheet Metal. Tr. 302. Polka held the office of Secretary/Treasurer of Inc. and controller of Management until May 1, 2003, when he was promoted to Secretary/Treasurer of Management while maintaining his office with Inc. Polka's duties remained the same before and after moving into the Secretary/Treasurer position with Management. Polka's salary did not increase after moving into the Secretary/Treasurer position with Management. Polka's supervisor has always been Jon Ford. Polka received a raise in September 2002 from Jon Ford. He received his 2001 or 2002 raise also from Jon Ford.
29. Thomas Ford is the payroll clerk and he works for Polka. Thomas Ford does payroll for Inc. and had done it for Sheet Metal until the beginning of September 2004. He also does Sheet Metal's payables. He also does a number of reports for Jon Ford and O'Day. Thomas Ford is paid by Management.
30. Cyndi Choate was hired by Jon Ford in October 1985 to work for Inc. as a secretary-receptionist. Choate receives the mail in a big bundle and separates it into piles for Jon Ford, Roger Ford, Polka, Thomas Ford, and the estimating department. Choate types certified payroll reports for Thomas Ford and used to do the same for Tammy Colson before she left Todd-Ford. Choate is not Roger Ford's secretary. Choate has insurance through Inc. and participates in the profit sharing plan. Jon Ford has given Choate yearly statements about her profit sharing plan.
31. The offices of Jon Ford, Choate, John Ford, Polka, Thomas Ford, Roger Ford, and the sheet metal office, the sheet metal department, and the shop are all located at the 1914 Breeden building. Lisabeth Ford and Tammy Colson, the payroll administrator, also worked at the 1914 Breeden building before they both left Todd-Ford. The sign on the front of 1914 Breeden says "Todd-Ford." The 1914 Breeden building houses Sheet Metal at the end of one hallway and Management in several offices.
32. The Todd-Ford companies have four estimating stations, all located at 1914 Breeden. Ken Gottard, David Lee, and Roger Ford use these stations.
33. Sheet Metal's files are initially filed in Roger Ford's office, then stored at the warehouse at 2002 Breeden, then moved to 1421 Colorado, which is the old Jud Plumbing building.
34. Choate refers to the Colorado office as Todd-Ford South.
35. O'Day's business card says Todd-Ford Mechanical Contractors and lists 1914 Breeden as his office address. PX-57. His phone number is 732-9791, which rings at 1914 Breeden and is answered by Cyndi Choate. At the time of trial, O'Day testified that he was currently officing at 1421 North Colorado. Tr. 425.
36. Polka's business card shows his business address as 1914 Breeden and his phone number as 732-9791 and his fax number as 732-9910. PX-53. He says it is accurate.
37. The email addresses for all Todd-Ford employees who have one ends with todd-ford.com.
38. Payroll and accounts payables checks for Inc. are done at 1914 Breeden.
39. Roger Ford's business card shows his business address as 1914 Breeden. The fax number on Roger Ford's card is the same fax number used by Inc. and Management. PX-54.
40. Inc. owns all the fixed assets used by all three Todd-Ford companies including office equipment, both office buildings and the warehouse, all vehicles, all furnishings, all improvements, and the phone/fax system.
41. Inc.'s financial statements for 2003 and 2004 show that it counts among its assets land, building, transportation equipment, equipment and tools, furniture and fixtures, and improvements, and takes depreciation for all of it except the land and building. Inc.'s fixed assets in 2003 totaled $4,761700.45 and $5,249,752.09 in 2004.
42. Sheet Metal's financial statements for 2003 and 2004 show that it owns no fixed assets and takes no depreciation on any fixed assets.
43. Management's financial statements for 2002, 2003, and 2004 show that it owns no fixed assets and takes no depreciation on any fixed assets.
44. O'Day has known for a long time that Inc. owns all assets, equipment, office equipment, facilities, vehicles, fabricating equipment, and the phone system used by all three Todd-Ford companies.
45. Sheet Metal does not pay any rent or make any other type of payment to Inc. for the use of Inc.'s assets, equipment, or utilities.
46. Inc. pays for all utilities used by all three of the Todd-Ford companies including water, electricity, phone system, and gas purchased for the vehicles used by all three Todd-Ford companies through gas cards.
47. Sheet Metal does not pay for any vehicle insurance on the company vehicles its employees drive.
48. Neither Management nor Sheet Metal reimburses Inc. for the services of receptionist Choate or Saul Zamora.
49. O'Day does not think Sheet Metal reimburses Inc. for anything and that such failure to reimburse Inc. helps Sheet Metal to be profitable and competitive. Sheet Metal does not pay any rent or make any other type of payment to Inc. for the use of Inc.'s assets, equipment, or utilities.
50. Inc. recently bought a coil line for Sheet Metal that costs somewhere between $400,000 and $500,000. Tr. 344. Only Sheet Metal uses this equipment. Tr. 388. O'Day does not know if Sheet Metal will pay Inc. back for this purchase. O'Day has no authority over whether Sheet Metal will pay Inc. for the coil line. Roger Ford does not know where the money came from to buy the coil line but believes that it did not come from Sheet Metal.
51. Sheet Metal does not own its fabricating equipment, vehicles, copier, fax, or computers other than possibly the plasma cutter computer, but Sheet Metal uses all this equipment. Roger does not know if Sheet Metal pays rent or makes lease payments on this equipment and any facilities it uses, but he knows he does not approve such payments if they are made and he has never been told that Sheet Metal owes any such payments.
52. Polka reviewed Inc.'s and Sheet Metal's year-end financial statements for April 30, 2003 and stated they appeared to be complete. These financial statements show that Inc. received $1.4 million from Sheet Metal and owes it to Sheet Metal, but Inc. is not paying it back on a monthly basis. There is no formal documentation about the $1.4 million liability between Inc. and Sheet Metal.
53. Inc. and Sheet Metal pay a management fee to Management to cover the payrolls, surcharges, labor-related charges, taxes, and insurance for Management employees and the interest on the loans from Frost National Bank. Tr. 291, 305. Polka computed the 90/10 allocation of this fee to Inc. and Sheet Metal, respectively, in the mid or early 1990s based on past revenues. Tr. 303. He has not reviewed the accuracy of the allocation since then. Tr. 303. The amount of the management fee charged to Inc. and Sheet Metal fluctuates depending on the amount of Management's expenses. However, the percentage of the fee apportioned to each company does not fluctuate; Inc. pays ninety percent and Sheet Metal pays ten percent. The management fee is not in any way reflective of the true cost incurred by Sheet Metal for work done by Management employees on its behalf.
54. During the period at issue herein, the money in Sheet Metal's Field Payroll bank account with Frost National Bank is used to pay Sheet Metal's employees. During the period at issue herein, all the money that is deposited into Sheet Metal's Field Payroll bank account comes from Sheet Metal's Operating bank account with Frost National Bank. During the period at issue herein, Sheet Metal's Field Payroll bank account has a zero balance at the beginning and ending of each month.
55. During the period at issue herein, the vast majority of the money that is deposited into Sheet Metal's Operating bank account comes from Inc.'s bank account with Frost National Bank. During the period at issue herein, money from sources other than Inc. is also deposited into Sheet Metal's Operating bank account, but it is a significantly smaller amount than that deposited by Inc. into Sheet Metal's Operating bank account.
56. During the period at issue herein, the money in Management's Payroll bank account with Frost National Bank is used to pay Management's employees. During the period at issue herein, all the money that is deposited into Management's Payroll bank account comes from Management's Operating bank account with Frost National Bank. During the period at issue herein, Management's Payroll bank account has a zero balance at the beginning and ending of each month. During the period at issue herein, the money that is deposited into Management's Operating bank account comes from Inc.'s bank account with Frost National Bank. During the period of February 1, 2003 through May 28, 2004, the Operating bank account for Management does not show any deposits or credits to it from Sheet Metal. The only transfers and credits into this account came from Inc.'s Operating bank account.
57. During the period at issue herein, Sheet Metal has made no deposits or transfers into Management's Payroll bank account or its Operating bank account.
58. On March 17, 2003, a payment of $500,000.00 was made to Management from a loan from Frost National Bank to Management but it was deposited into Inc.'s account, not Management's account.
59. O'Day hired Kathy Loftus to work for Inc. doing basic secretarial work. Kathy Loftus does the Sheet Metal payroll checks. Kathy Loftus is now doing the Sheet Metal payroll and she has always done Inc.'s payables, bank reconciliation, and supports Inc.'s project managers. Loftus has been paid by Inc. but Polka is moving her to Management.
60. O'Day reviews the gas card bills for all Todd-Ford employees who have one. These bills are given to him by Loftus and paid by Inc. The list of employees who have gas cards includes employees from all three Todd-Ford companies. The list of Valero cardholders is from September 23, 2004. Roger Ford's Valero gas card has the name Todd-Ford Inc. on it. Loftus gave Roger Ford the gas card he produced at his deposition.
61. Saul Zamora and Brian Bonnenberger are nonunion employees of Inc. Bonnenberger works in Inc.'s warehouse next door to 1914 Breeden. Approximately three years ago, Zamora worked for Management. He was switched to Inc. per Polka's decision because of cost reimbursement possibilities under a contract. Zamora handles the vehicle and truck fleet management for both Inc. and Sheet Metal. Zamora has assisted Roger Ford in moving his files into storage.
62. Profit sharing meetings take place at the 1914 Breeden office in the conference room. Jon Ford runs the profit sharing meetings and has done so since 1991. Everyone in all three Todd-Ford companies, once vested, who is not a union member can participate in the profit sharing plan.
63. Between 1998 and 2005, Sheet Metal did not have a listing in the business white pages or advertise in the yellow pages. Sheet Metal does advertise in the ASHRAE product directory and is listed in the SMACNA directory of contractors. Tr. 339.
64. Jim Graham was an employee of Management. Tr. 267. Though Graham was employed by Management, he did work for Inc. and assisted Jon in developing Inc.'s bid packages. Tr. 274. Graham sometimes prepared budgets for sheet metal work on Inc. contracts even when Sheet Metal did not submit a bid. Tr. 267,334. The budget is not what Sheet Metal would have bid, but Graham's estimate of what a reasonable sheet metal bid would have been on the job. Tr. 269. John Ford sometimes asked Roger whether Sheet Metal would subcontract a job for the budget that Graham had estimated. Tr. 334. Roger decided whether Sheet Metal would do so; he was not made to do so. Tr. 335. Graham sometimes worked with Roger to prepare bids. Tr. 332-333.
65. Inc. and Sheet Metal keep separate payroll records and have separate payroll accounts. Tr. 71. They also make separate regulatory filings and file their taxes separately. Tr. 292-300. Accounting documents such as journal entries, general ledgers, and payroll registers are kept separately by Inc. and Sheet Metal. Tr. 221. Polka, the business manager for the holding company, keeps the books for Sheet Metal and Inc. Tr. 221. He testified that each company is required to file separately and that the separate filings do not necessarily tell one about the interrelationship or operations of the companies. Tr. 306.
66. Between 1985 and 2003, Inc. and Sheet Metal did not exchange employees or management at the field level. Tr. 218. Inc. and Sheet Metal do not share superintendents, foremen, project managers, journeymen, or apprentices. Tr. 219, 406. Phil Gray, a project manager employed by Inc. did estimate one small change order for Sheet Metal. Tr. 466-67.
67. Roger Ford manages the field level employees of Sheet Metal. Tr. 219, 336. No one from Inc. or Management has ever exercised control over Sheet Metal's field operations. Tr. 336.
68. Jon Ford formulated the labor relations policies for Inc. until 2003. Tr. 219. O'Day has formulated the labor relations policies for Inc. since April 2003. Tr. 219-220, 406-07. O'Day is the sole director of Inc. (since 2003). Tr. 220.
69. O'Day and Roger do not share management of any employees and do not manage each other's employees. Tr. 407.
70. Inc. secures its work primarily through competitive bidding. Tr. 196. Typically, sheet metal work composes ten to fifteen percent of the total mechanical cost of a job. Tr. 197. At the time of trial, however, Sheet Metal was performing a job that was almost 50% of the total contract. Tr. 317. Inc. subcontracts out the sheet metal portion of a mechanical contract, as well as other portions of the job. Tr. 198. Inc. has not self-performed any sheet metal work since the 1985 reorganization. Tr. 198. Inc. subcontracted sheet metal work to union companies before the 1985 reorganization. Tr. 199.
71. Before 1985, Inc. could not subcontract to a non-union firm for sheet metal work because it was prohibited by the CBA. After 1985, Inc. received bids from Sheet Metal and other firms for sheet metal work. Tr. 234. In 1985, Jon Ford was not aware of any nonunion or merit shop sheet metal firms operating in San Antonio. Tr. 226. He was not aware of any such firms until the mid-nineties. Tr. 226. In 1985, Roger did not know that he would be competing with non-union subcontractors for bids. Tr. 381. The Sheet Metal Bid Recap shows that Inc. always awarded sheet metal subcontracts to the lowest bidder regardless of union affiliation. Tr. 234, 255. Between 1985 and 1996, Inc. awarded subcontracts to either Sheet Metal or other union signatories. Tr. 255. Inc. awarded its first non-union subcontract to B.G. Metals in 1996. Inc. did not change its practice in awarding bids to the lowest responsible bidder from 1985 to the mid-nineties or thereafter. Tr. 237. What did change was the union affiliation of the firms bidding for subcontracts from Inc. Until the mid-nineties, all of the firms bidding were union-affiliated. Tr. 235. Inc. prefers to subcontract with union companies when market conditions allow. Tr. 222. Inc. would not have been awarded some contracts had it used the higher sheet metal bid instead of the non-union bid. Tr. 212, 214, 276. Jon Ford and Inc. have not tried to hide the fact that Inc. has been subcontracting to non-union firms. Tr. 239-240.
72. Roger Ford refused Inc.'s request to bid a job recently because Sheet Metal had just lost three jobs to B.G. Metals and he did not want to waste his time. Tr. 372. Roger Ford decides whether Sheet Metal will submit bids on projects. Tr. 221. However, it is customary for someone in Inc. or Management to check with Roger to see if he is interested in submitting a bid for a job. Tr. 272. Sheet Metal can and has submitted bids to companies other than Inc. Tr. 324, 331. In a typical year, Sheet Metal also does numerous "miscellaneous small jobs" for other contractors that represent approximately $500,000 worth of work. Tr. 327-38. Roger prefers not to bid on jobs in the Austin area. Tr. 359.
73. Roger Ford cannot stop Inc. from subcontracting to non-union sheet metal firms and Sheet Metal does not control how Inc. submits bids to general contractors. Tr. 340-41.
74. Sheet Metal is not as profitable today as it was in 1990. In fiscal year ending 2003, Sheet Metal did not make a profit; it had an approximately $70,000 loss. Tr. 54-55. In fiscal year ending 2004, Sheet Metal had a $10,000 profit.
75. For fiscal year 2003, Inc.'s business accounted for approximately 89% of Sheet Metal's revenue. Tr. 50. For fiscal year 2004, it accounted for approximately 80% of Sheet Metal's revenue. Tr. 50. Roger Ford testified that he believed Inc. accounted for approximately 95% of Sheet Metal's revenue. Tr. 331. Roger testified that he there is an advantage to him in working for Inc. because the bid documents are in the building and they always have paid him well and on time. Tr. 331.
76. All three Todd-Ford companies used the same attorney, Frederic Gover, for their initial answers. Mr. Carrabba filed his appearance nearly four months after service of the original Complaint.
77. B.G. Metals prepared a list of projects that Inc. awarded it and that its employees worked on between September 12, 2002 and October 21, 2004. Jon Ford explained how Inc.'s project designations and B.G. Metals' project designations on their respective lists matched up. One of B.G. Metal's accountants, Lynne Grix, prepared a chart entitled "B.G. Metals, Inc. Recap of Labor Hours by Project and by Classification" that shows the hours worked by B.G. Metal employees for Inc. on the projects on B.G. Metal's list of projects Inc. awarded to it. This Recap of Labor Hours prepared by Ms. Grix was used by Tim McGrath to calculate the damages owed to Plaintiff. Mr. McGrath also included amounts in his Damages Calculation in the nature of penalties called for in the Collective Bargaining Agreement when it is not followed.
78. Mr. McGrath calculated that Defendants owe Plaintiff a total of $8,323,795.12, which Plaintiff contends includes the amounts due the foremen, journeymen, apprentices, classified workers, and pre-apprentices who would have worked on the projects if Defendants had complied with the Collective Bargaining Agreement. This calculation also includes amounts Plaintiff contends are owed to the sheet metal workers to be deposited into their benefit funds described in the Collective Bargaining Agreement and the amounts Plaintiff contends are owed to Plaintiff as dues and for its Equality Fund.
79. Workers who get work by virtue of being on the out-of-work list are chosen by the company that will employ them. Plaintiff does not require an employer to simply accept the top names on the list.
80. Plaintiff provided Defendants with a copy of the Amended Damages Calculation plus Wage Sheets and the out-of-work lists maintained by Plaintiff.
Alter Ego Fact Findings
1. Management. Roger Ford is the sole director of Sheet Metal. He and Lisabeth have been the only directors of Sheet Metal. Roger has been President of Sheet Metal since its creation. Roger is in charge of labor relations and labor policies for Sheet Metal. Roger has hiring and firing authority. Roger is in charge of the day-to-day management of Sheet Metal and, except with regard to his salary and certain financial matters handled by Polka (a Management employee), is vested with decisionmaking authority regarding employees, work, and day-to-day operations. O'Day, and previously Jon Ford, manages the day-to-day operations of Inc. Jon Ford and O'Day do not have decisionmaking authority regarding the day-to-day operations of Sheet Metal and are not involved in the day-to-day management of Sheet Metal. Sheet Metal and Inc. do not have substantially identical management.2. Business Purpose. Inc.'s business purpose is to perform mechanical contracting. Inc performs sheet metal work only through subcontract. Inc. does not self-perform any sheet metal work. Sheet Metal's business purpose is to fabricate and install sheet metal. Inc.'s business is broader in scope and geographical reach than Sheet Metal's. Inc. and Sheet Metal do not have substantially identical business purposes.
3. Operation. The parties disagree on the scope of this factor. Defendants argue that operations means what a business does to make a profit, and the focus should therefor lie on the field employees. Plaintiff argues that this factor considers how a company actually goes about the business of making money from the highest level of the corporation on down, not just where the employees actually physically perform the labor. Though the field employees and actual profit-making business of the entity are highly important in the analysis, the Board has looked to a much broader range of factors in evaluating the operations factor. Thus, this Court will too. Inc. and Sheet Metal share the phone system, receptionist, fax, and email domain name, and their employees have used the Breeden and Colorado St. facilities. Inc. and Sheet Metal currently office at separate locations. They use the same bank. Management employees such as Polka are involved in Inc.'s and Sheet Metal's affairs such as accounting and bookkeeping and maintaining health insurance. Inc. pays for all employees' health insurance and gas cards. Inc. owns the vehicles used by Inc. and Sheet Metal and Inc. pays the auto insurance. At the field level, Inc. and Sheet Metal do not have substantially identical operations. However, overall, Inc. and Sheet Metal have substantially identical operations, resulting largely from the fact that both are wholly owned subsidiaries of Management.
4. Equipment. Only Sheet Metal employees operate fabricating equipment and Sheet Metal employees and Inc. employees install different items. Inc. owns all the equipment used by Sheet Metal. However, Inc. and Sheet Metal do not use substantially identical equipment in performing their work.
5. Customers. Inc.'s customers are the general contractors who award it bids. Sheet Metal's primary customer (at least 80% of its revenue) is Inc., and thus Sheet Metal also performs work for the general contractors. Sheet Metal also performs some work for other entities. Although Inc. is Sheet Metal's primary customer, both Inc. and Sheet Metal ultimately perform jobs for the general contractor or owner. Sheet Metal and Inc. have substantially identical customers.
6. Supervision. Roger has ultimate supervisory authority over Sheet Metal employees. Project managers, superintendents, foremen, and sub-foremen of Sheet Metal do not supervise any Inc. employees and Inc. project managers, superintendents, foremen, and sub-foremen do not supervise any Sheet Metal employees. Sheet Metal and Inc. do not have any shared supervisors, nor does anyone from Inc. supervise Sheet Metal employees (other than in the capacity of contractor/subcontractor). Inc. and Sheet Metal do not have substantially identical supervision.
7. Ownership. Both Inc. and Sheet Metal are wholly owned subsidiaries of Management. All voting stock in Management was owned by the family partnership, whose general partners were John and Jon. As of February 2004, Jon owned all voting shares in Management. Only Ford family members have owned stock in the companies and they have remained close corporations. Inc. and Sheet Metal have substantially identical ownership.
8. Unlawful motive. Defendants did not have an unlawful motive for the reorganization in 1985, nor did they have an unlawful motive at any time when Inc. began subcontracting sheet metal work to nonunion firms or when they represented to Plaintiff that the Todd-Ford companies are independent companies. There was no disguised continuance or attempt to avoid the obligations of the existing CBA through a sham transaction or technical change in operations. Defendants openly reorganized the company and approached the Plaintiff Union about assigning the sheet metal CBA to Sheet Metal. Although no party contemplated in 1985 that Inc. would eventually subcontract sheet metal work to non-union firms, Defendants communicated to Plaintiff that Inc. would no longer self-perform sheet metal work but would subcontract sheet metal work. There was no promise, express or implied, or other obligation to subcontract only to union sheet metal firms once released from the CBA. Plaintiff Union released Inc. from the CBA by signing the letter in 1990. As of 1990, Inc. justifiably believed itself released from the CBA and its subcontracting restrictions, and thus Inc. had no unlawful motive when it began subcontracting to nonunion firms in 1996. Moreover, though Sheet Metal is less profitable today than it was in 1990, Inc. continued to provide Sheet Metal with ample work, did not actively encourage or contribute to its decline by subcontracting to nonunion firms, and continued to provide support to Sheet Metal such that it could remain in business. Most of Inc.'s sheet metal subcontracts were awarded to Sheet Metal or other union firms. The fact that Sheet Metal did not rapidly decline after the 1985 reorganization or after Inc. began subcontracting and the fact that Inc. itself remained a union company with regard to its plumbers and pipefitters further indicate that Inc. was not attempting to divert business from Sheet Metal or escape further dealings with the Union.
9. Considering all the factors, the Court finds that Inc. and Sheet Metal are not alter egos for purposes of imposing the CBA on Inc. Though this case presents a close question on the first seven alter ego factors because of the parent/subsidiary relationships among the Todd-Ford companies, the Court finds that the lack of an unlawful motive, which it gives substantial weight, and the balance of the other factors preclude a finding that Inc. is an alter ego of Sheet Metal such that it should be bound by the CBA.
10. Because the Court finds that Inc. and Sheet Metal are not alter egos and Management is not accused of unlawfully subcontracting, the Court need not determine whether Management is an alter ego of Inc. or Sheet Metal such that it would be jointly liable for a breach of the CBA.
11. The Court finds that, even if Sheet Metal and Inc. could have been considered alter egos based on the eight factors, the fact that the Union released Inc. from the CBA in 1990 precludes the Union's current claim that Inc. is bound by the CBA.
Conclusion
This case presents a unique fact pattern in the way that Inc. was reorganized in 1985 and in the fact that the Union released Inc. from the CBA in 1990. The Court has attempted to apply the alter ego factors, though the parties have cited and the Court has located no case or Board order that deals with a similar fact pattern.
Considering the alter ego factors established by the Board and adopted by the Fifth Circuit, the Court finds that Inc. and Sheet Metal are not alter egos such that Inc. should be bound by the CBA. Alternatively, even if they are alter egos, the Union's release of Inc. from the CBA precludes their current claim that Inc. is bound by the CBA.
Accordingly, the Court finds that judgment should be entered in favor of Defendants and that Plaintiff should take nothing. The Court will issue a separate judgment pursuant to Rule 58.