Opinion
File No. 4:03-CV-188.
April 5, 2005
OPINION
This matter comes before the Court on Plaintiffs' February 14, 2005, motion for partial summary judgment directed to claims against Defendant Steve Morley, individually, d/b/a Morley Plumbing Heating and/or d/b/a Steve Morley Plumbing. Defendant Steve Morley has not filed a response to the motion. A party opposing a dispositive motion is required to file a responsive brief within 28 days after service of the motion. W.D. MICH. L. CIV. R. 7.2(c). Because more than 28 days have elapsed after service of the motion, this unopposed motion is ripe for disposition.
I.
Plaintiffs are trustees and fiduciaries for various multi-employer benefit and welfare plans that provide health care and retirement benefits for plan participants and beneficiaries in the pipefitting industry. The plans are funded by contributions paid pursuant to the terms of collective bargaining agreements, trust agreements and rules adopted by Plaintiffs. The plans are governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Under ERISA, any employer that is required to make contributions to a multi-employer fringe benefit fund, such as the ones in issue in this action, must in fact make such contributions. 29 U.S.C. § 1145. ERISA authorizes the trustees of such multi-employer fringe benefit funds, such as Plaintiffs, to seek the recovery of delinquent contributions. See 29 U.S.C. § 1132(d).
On January 10, 2001, Plaintiffs obtained a default judgment against Morley Plumbing Heating, Inc., a Michigan corporation, and Scott Morley, in the amount of $91,231.72 for delinquent fringe benefit contributions. Upper Peninsula Plumbers and Pipefitters Health and Welfare Fund v. Morley Plumbing and Heating, Inc., 4:00-CV-185 (W.D. Mich. Jan. 10, 2001) (Docket # 8). This judgment remains unsatisfied.
Plaintiffs allege in Count I of their amended complaint that Defendant Steve Morley, individually, d/b/a Morley Plumbing Heating, and/or d/b/a Steve Morley Plumbing, is the successor and/or alter ego to Morley Plumbing Heating, Inc., that he is subject to the collective bargaining agreements that Morley Plumbing Heating, Inc., was bound by, and that he is responsible for payment of the judgment entered against Morley Plumbing Heating, Inc.
II.
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In evaluating a motion for summary judgment the Court must look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). If the moving party carries its burden of showing there is an absence of evidence to support a claim or defense, then the non-moving party must demonstrate by affidavits, depositions, answers to interrogatories, and admissions on file, that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25 (1986). The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient to create a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). The proper inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52.III.
The relevant facts are not in dispute. Jon Morley started Jon R. Morley Plumbing as a sole proprietorship in 1985. (Jon Morley dep. at 7). In 1988 Jon Morley's son, Scott Morley, began working with him. (Jon Morley dep. at 11). In 1991 Jon's son, Steve Morley, began working with him. (Steve Morley dep. at 7). Jon Morley signed a union contract in July 1990. (Ex. 3). In 1994 Jon Morley incorporated the business under the name Morley Plumbing Heating, Inc. (Ex. 4). Morley Plumbing Heating, Inc. continued to operate pursuant to the terms of the union contract that Jon Morley had signed as a sole proprietor. (Jon Morley dep. at 18). All employees of the corporation were union members. (Steve Morley dep. at 8). The company paid wages pursuant to union scale and paid fringe benefit contributions. In 1995 Scott and Steve became more involved with the business, Scott Morley as President, and Steve Morley as Vice President. (Ex. 5, 6, and 7). In 1996 Jon Morley transferred his interest in Morley Plumbing and Heating to his sons, Scott and Steve. (Jon Morley dep. at 52). In 1998 Scott and Steve Morley had a "falling out" over the operation of the business. Scott Morley went to work for another company, Elliott Plumbing and Heating. Steve Morley continued to operate Morley Plumbing Heating. (Steve Morley dep. at 12-14). At some point after 1998 Steve Morley discontinued working for Morley Plumbing and Heating, but continued to work as Steve's Plumbing and Heating doing the same type of work. (Steve Morley dep. at 16-20). He described his reasons for starting his own company:
I set it up because of the disputes that was going with it. And at that time it was — you know, it was Morley's Plumbing and Scott Morley that was being, you know — what's the word I want to use? — sued or whatever. . . . And I just wanted to — it was just a total mess and I wanted to get right away from all of that. . . . It was more or less for — just to distance. I was mad at my brother and — you know, and the situation with that. And my mom and dad were being hurt over it and I just wanted to distance myself from that end of it, because I didn't feel I was involved in it.
(Steve Morley dep. at 17-18). When he set up his own business doing essentially the same type of work as a plumber, his desire was to get away from the union. (Steve Morley dep. at 18).
Steve Morley is licensed by the state as a journeyman plumber. (Steve Morley dep. at 21). His father is licensed as a master plumber. Because journeymen cannot obtain plumbing permits, Steve Morley has been using his father's license to obtain permits.
The union contract has an "Evergreen Clause," pursuant to which the contract continues to rollover if it is not terminated. None of the Morleys ever sent a letter to the union terminating Morley Plumbing and Heating's contract with the union. (Steve Morley dep. at 26). Payments continued to be made into the union fringe benefit fund on behalf of Jon Morley through 1998, on behalf of Scott Morley through 1999, and on behalf of Steve Morley through 2002.
IV.
Plaintiffs seek a determination that Steve Morley individually, and/or doing business as Morley Plumbing Heating, and/or Steve Morley Plumbing, is the successor and/or alter ego to Morley Plumbing Heating, Inc.
The alter ego doctrine "prevent[s] employers from evading obligations under [the National Labor Relations Act] merely by changing or altering their corporate form." Trustees of Resilient Floor Decorators Ins. Fund v. A M Installations, Inc., 395 F.3d 244, 247 (6th Cir. 2005) (quoting NLRB v. Allcoast Transfer, Inc., 780 F.2d 576, 579 (6th Cir. 1986)). "Courts generally use the `alter ego' doctrine in situations where a change in corporate or business entities threatens to evade collective bargaining obligations." Int'l Longshoremen's Ass'n, AFL-CIO, Local Union No. 1937 v. Norfolk S. Corp., 927 F.2d 900, 902 (6th Cir. 1991). The alter ego doctrine is most commonly used "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., Inc., 910 F.2d 331, 336 (6th Cir. 1990) (quoting Southport Petroleum, Co. v. NLRB, 315 U.S. 100, 106 (1942)). "[A] new corporation that is the alter ego of the employer it replaced will be held to all of the prior employer's agreements and obligations." Fullerton Transfer, 910 F.2d at 336 n. 6.
The test for whether one entity is the alter ego of another is "whether the two enterprises have substantially identical management, business, purpose, operation, equipment, customers, supervision and ownership." Resilient Floor Decorators, 395 F.3d at 249 (quoting Nelson Electric v. NLRB, 638 F.2d 965, 968 (6th Cir. 1981)). In Nelson Electric the court found a nonunion successor company to be the alter ego of its union predecessor where the company name was changed but the customers, management, equipment, and employees remained the same and the cash assets of the entities were commingled. 638 F.2d at 968. "In order to effectuate federal labor policies, the courts and the Board have applied this version of the alter ego doctrine in a more relaxed, less exacting fashion than would be required under federal common law principles." Fullerton Transfer, 910 F.2d at 336. "`[A]n intent to evade' preexisting obligations is `clearly the focus of the alter ego doctrine.'" Resilient Floor Decorators, 395 F.3d at 248 (quoting Cement Masons' Pension Trust Fund v. O'Reilly, 664 F. Supp. 277, 279 (E.D. Mich. 1987)).
There can be no real dispute that Steve Morley is the alter ego of Morley Plumbing and Heating, Inc. He has admitted that the reason for the change in the corporate form was to avoid liability and to distance himself from the union. The two businesses had substantially identical management, business, purpose, operation, equipment, customers, supervision and ownership. Steve Morley ran Morley Plumbing and Heating after Scott Morley left in 1998, and Steve Morley is the sole proprietor of Steve's Plumbing. Both businesses offered plumbing contracting services. Both businesses used the same license, Jon Morley's Master Plumber's license, to pull permits. Both businesses used the same tools. Both businesses served the same clientele. At the time of the dissolution of Morley Plumbing Heating and the filing of the d/b/a for Steve's Plumbing, Steve Morley controlled both businesses. Steve Morley continued to make fringe benefit contributions on his own behalf until 2002.
Based upon all of these factors the Court finds that there are no material issues of fact. Defendant Steve Morley, individually, d/b/a Morley Plumbing Heating and/or d/b/a Steve Morley Plumbing, is the successor and/or alter ego to Morley Plumbing Heating, Inc., as a matter of law. He is subject to the collective bargaining agreements that Morley Plumbing Heating, Inc., was bound by, and he is responsible for payment of the judgment entered against Morley Plumbing Heating, Inc.
An order and partial judgment consistent with this opinion will be entered.