Board of Trustees of the California Ironworkers Field Pension Trust v. M.M. Stevens, LLC et al

Filing 56

ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT 45 by Judge Dean D. Pregerson. The pendency of bankruptcy proceedings regarding S Diamond is no bar to Plaintiffs case against Defendants. Plaintiffs' Motion for Summary Judgment 45 is GRANTED. IT IS SO ORDERED. MD JS-6. Case Terminated. (smo)

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1 2 JS-6 3 O 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 BOARD OF TRUSTEES OF THE CALIFORNIA IRONWORKERS FIELD PENSION TRUST, 13 Plaintiff, 14 v. 15 M.M. STEVENS, LLC, ET AL., 16 Defendants. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 16-07791 DDP (AJWx) ORDER GRANTING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT [Dkt. 45] 17 18 Presently before the court is Plaintiffs’ Motion for Summary 19 Judgment. 20 heard oral argument, the court grants the motion and adopts the 21 following Order. 22 I. 23 Having considered the submissions of the parties and Background Between June 1999 and July 2013, S Diamond Steel, Inc. (“S 24 Diamond”) made contributions, pursuant to a collective bargaining 25 agreement, to the California Ironworkers Field Pension Trust (“the 26 Plan”), a multiemployer employee benefits plan within the meaning 27 of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. 28 § 1002(37)(A). S Diamond ceased making contributions to the Plan, 1 and Plaintiff Board of Trustees of the California Ironworkers Field 2 Pension Trust determined that S Diamond withdrew from the Plan as 3 of July 31, 2013.1 4 Multiemployer Pension Plan Amendments Act (“MPPAA”), Plaintiffs 5 assessed withdrawal liability of $1,310,439.50 against S Diamond 6 and notified S Diamond of the same. 7 Fund for N.California v. Underground Const. Co., 31 F.3d 776, 778 8 (9th Cir. 1994); 29 U.S.C. § 1381 et seq. 9 dispute the imposition of withdrawal liability by invoking the Under authority granted to the Plan by the See Carpenters Pension Trust S Diamond did not 10 MPAA’s exclusive arbitration provision. See, e.g. Operating 11 Engineers’ Pension Trust Fund v. Clark's Welding & Mach., 688 F. 12 Supp. 2d 902, 907 (N.D. Cal. 2010). 13 At no time has S Diamond made any withdrawal liability 14 payments. S Diamond filed for Chapter 11 bankruptcy in the 15 District of Arizona on July 11, 2016. D. Ariz. Case No. 2:16-bk- 16 07846. That court, overruling S Diamond’s objection to Plaintiffs’ 17 proof of claim, has found S Diamond liable for withdrawal 18 liability, liquidated damages, and attorneys fees in amounts to be 19 determined at a later date. 20 21 22 In the instant suit, Plaintiffs allege that Defendants are jointly and severally liable for S Diamond’s liabilities because 23 24 25 1 26 27 28 Defendants maintain that S Diamond sent notice of its intent to withdraw, but did not actually withdraw. As discussed further herein and explained in this Court’s prior Order, however, S Diamond never initiated arbitration or otherwise challenged Plaintiff’s determination that S Diamond withdrew from participation in the Plan. See Dkt. 37 at 4-5. 2 1 all three entities are members of the same controlled group.2 2 the time S Diamond withdrew from the Plan, Matthew Stevens owned At 3 100% of S Diamond’s shares. Matthew Stevens’ wife, Dana, owned 4 over ninety percent of Defendant Milco Solutions, Inc. (“Milco”). 5 Matthew and Dana Stevens collectively owned 100% of Defendant M.M. 6 Stevens, LLC (“M.M. Stevens.”) 7 Plaintiffs now move for summary judgment. 8 9 II. Legal Standard 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Summary judgment is appropriate where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. Catrett, 477 U.S. 317, 323 (1986). See Celotex Corp. v. All reasonable inferences from the evidence must be drawn in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242 (1986). If the moving party does not bear the burden of proof at trial, it is entitled to summary judgment if it can demonstrate that “there is an absence of evidence to support the nonmoving party’s case.” Celotex, 477 U.S. at 323. 27 28 A party 2 3 1 Once the moving party meets its burden, the burden shifts to 2 the nonmoving party opposing the motion, who must “set forth 3 specific facts showing that there is a genuine issue for trial.” 4 Anderson, 477 U.S. at 256. 5 party “fails to make a showing sufficient to establish the 6 existence of an element essential to that party’s case, and on 7 which that party will bear the burden of proof at trial.” 8 477 U.S. at 322. 9 that a reasonable jury could return a verdict for the nonmoving Summary judgment is warranted if a Celotex, A genuine issue exists if “the evidence is such 10 party,” and material facts are those “that might affect the outcome 11 of the suit under the governing law.” 12 There is no genuine issue of fact “[w]here the record taken as a 13 whole could not lead a rational trier of fact to find for the 14 nonmoving party.” 15 Corp., 475 U.S. 574, 587 (1986). Anderson, 477 U.S. at 248. Matsushita Elec. Indus. Co. v. Zenith Radio 16 It is not the court’s task “to scour the record in search of a 17 genuine issue of triable fact.” Keenan v. Allan, 91 F.3d 1275, 18 1278 (9th Cir.1996). Counsel have an obligation to lay out their 19 support clearly. Carmen v. San Francisco Sch. Dist., 237 F.3d 20 1026, 1031 (9th Cir.2001). The court “need not examine the entire 21 file for evidence establishing a genuine issue of fact, where the 22 evidence is not set forth in the opposition papers with adequate 23 references so that it could conveniently be found.” Id. 24 25 26 27 III. Discussion The central issue in this case is whether S Diamond, M.M. Stevens, and Milco are “controlled group members.” 28 4 Under the 1 MPPAA, pension plans can impose withdrawal liability on employers 2 that withdraw from a pension plan. 3 for N. California v. Underground Const. Co., 31 F.3d 776, 778 (9th 4 Cir. 1994); 29 U.S.C. § 1381 et seq. 5 common control” are treated as a single employer and are jointly 6 and severally liable for one another’s withdrawal liability. 7 of Trustees of Western Conference of Teamsters Pension Trust Fund 8 v. Lafrenz, 837 F.2d 892, 893 (9th Cir. 1988); 29 U.S.C. § 9 1301(b)(1). Carpenters Pension Trust Fund Trades and businesses “under Bd. 10 A group of trades or businesses constituting a “brother-sister 11 group” is considered to be under “common control.” 26 C.F.R. 12 §1.1414(c)-2(a). “The term ‘brother-sister group . . .’ means two 13 or more organizations conducting trades or businesses if (i) the 14 same five or fewer persons who are individuals, estates, or trusts 15 own (directly and with the application of § 1.414(c)–4) a 16 controlling interest in each organization, and (ii) taking into 17 account the ownership of each such person only to the extent such 18 ownership is identical with respect to each such organization, such 19 persons are in effective control of each organization. . . .” 26 20 C.F.R. § 1.414(c)-2(c); see also CMSH Co. v. Carpenters Tr. Fund 21 for N. California, 963 F.2d 238, 240 (9th Cir. 1992). Plaintiffs 22 assert that S Diamond, M.M. Stevens, and Milco comprise a brother23 sister group, and therefore constitute a single employer under the 24 MPPAA. 25 Thus, Plaintiffs contend, M.M. Stevens and Milco are jointly and severally liable for S Diamond’s withdrawal liability.3 26 27 3 28 There is no dispute that each of the entities conducts a trade or business. 5 1 There appears to be no dispute as to who possessed what 2 ownership interest in each of the entities. 3 100% of S Diamond. 4 Dana Stevens, owned over 90% of Milco. 5 12, 36:24-25. 6 M.M. Stevens.4 Matthew Stevens owned (Bedolla Decl., Ex B at 41:7-9.) His spouse, (Bedolla Decl., Ex. A at 9- Michael and Dana Stevens collectively owned 100% of (Bedolla Decl., Ex. B at 15:12-22.) 7 Defendants argue that Milco is not part of a brother-sister 8 group with S Diamond because (1) the same persons did not own a 9 “controlling interest” in each alleged component organization and, 10 (2) considering ownership of each corporation only to the extent 11 such ownership was identical with respect to each organization, 12 neither Matthew nor Dana Stevens was in “effective control” of each 13 entity.5 In other words, Defendants argue that because Matthew 14 Stevens owned all of S Diamond and his wife, Dana, owned 90% of 15 Milco, neither of them had a controlling interest or effective 16 control of both entities, and therefore the two entities are not 17 members of a single brother-sister group. (Opposition at 14.) 18 19 “Ownership” under the relevant regulation includes both direct 20 ownership and ownership under 26 C.F.R. §1.1414(c)-4. 26 C.F.R. § 21 1.414(c)-2(c). 22 individual shall be considered to own an interest owned . . . by or Section 1.414(c)-4(b)(5)(ii) provides that “an 23 4 24 25 26 Defendants do not dispute that M.M. Stevens was part of a controlled group with S Diamond or that, at the time of S Diamond’s withdrawal, Michael and Dana Stevens “collectively held a 100% ownership interest as the only members of Defendant M.M. Stevens, L.L.C.” (Defendants’ Statement of Genuine Disputes ¶ 8.) 5 27 28 The regulations define “controlling interest” as ownership of at least 80% of a corporation’s stock and “effective control” as over 50% of voting power. 26 C.F.R. § 1.414(c)-2(b)(2)(i)(A), (c)(2)(I). 6 1 for his or her spouse.” 26 C.F.R. § 1.414(c)-4(b)(5)(ii). Thus, 2 Plaintiffs argue, Michael Stevens’ 100% interest in S Diamond is 3 attributable to his wife, Dana Stevens, who therefore owns 4 controlling interests in all three entities.6 5 Defendants argue, however that an exception to the spousal 6 attribution rule applies. That exception applies if four 7 conditions are met: (1) the non-owning spouse does not own any 8 interest in an organization; (2) the non-owning spouse “is not a 9 member of the board of directors, a fiduciary, or an employee of 10 such organization and does not participate in the management of 11 such organization . . .;” (3) not more than half of the 12 organization’s income is derived from royalties, rents, dividends, 13 interest, and annuities; and (4) the organization is not subject to 14 conditions which limit the owning spouse’s right to dispose of his 15 or her interest which run in favor of the non-owning spouse or the 16 non-owning spouse’s children. 1.414(c)-4(b)(5)(ii). Of these four 17 conditions, only the second appears to be at issue. Defendants 18 assert, albeit without citation to the record, that “Dana was not a 19 member of S Diamonds’ (sic) board of directors, was not a fiduciary 20 of S Diamond and did not participate in the management of S 21 Diamond.” (Opposition at 18:16-19.) 22 23 As an initial matter, Defendants’ argument appears to be 24 inconsistent with Dana Stevens’ deposition testimony, in which she 25 stated that her responsibilities at S Diamond included overseeing 26 “payroll, insurance, accounts payable, [and] accounts receivable . 27 28 6 See note 4, supra. 7 1 . . .” (Bedolla Decl., Ex. A at 32:4-5.) Even assuming, however, 2 that such responsibilities do not constitute “participation in the 3 management” of S Diamond for purposes of the spousal attribution 4 exception, there appears to be no dispute that Dana Stevens was an 5 employee of S Diamond. 6 “continuously employed by S. Diamond Steel, Inc. from 2000.” 7 at 31:19-20.) 8 among the other factors, the non-owning spouse is “not a member of 9 the board of directors, a fiduciary, or an employee of such Indeed, she testified that she was (Id. The spousal attribution exception only applies if, 10 organization.” 1.414(c)-4(b)(5)(ii)(B) (emphasis added). In 11 light of the undisputed evidence that, in Dana Stevens’ own words, 12 she was an S Diamond employee, the spousal attribution exception 13 does not apply. 14 interest in S Diamond is attributable to Dana Stevens. 15 Dana Stevens owned a controlling interest in Milco, M.M. Stevens, 16 and S Diamond, no reasonable trier of fact could dispute that those 17 entities were members of a single brother-sister group. 18 Defendants are jointly and severally liable for S Diamond’s 19 withdrawal liability. Accordingly, Michael Stevens’ 100% ownership Because As such, 20 B. Effect of S Diamond Bankruptcy Proceedings 21 22 S Diamond has filed for Chapter 11 bankruptcy in the District 23 of Arizona. D. Ariz. Case No. 2:16-bk-07846. The bankruptcy court 24 determined that S Diamond is liable for withdrawal liability, 25 interest, liquidated damages, and attorneys’ fees, in an amount to 26 be determined at a later date.7 (Declaration of Guy Bluff ¶ 13.) 27 7 28 The bankruptcy court made this determination in the context (continued...) 8 1 Defendants argue that, in light of the procedural posture of the S 2 Diamond bankruptcy proceeding, this court should not rule on 3 Plaintiffs’ Motion for Summary Judgment because the amount of 4 withdrawal liability will be determined in bankruptcy court. 5 Defendants’ argument is not persuasive. As an initial matter, 6 there has been no final disposition in bankruptcy court, and the 7 suggestion that the bankruptcy court’s determination regarding the 8 amount of S Diamond’s liability may differ from the amount sought 9 here is speculative at best.8 Furthermore, courts have rejected 10 similar arguments. As one court explained, bankruptcy proceedings 11 “simply cannot affect the derivative legal liability of a 12 nonbankrupt affiliate, any more than one joint tortfeasor would be 13 protected because another is in bankruptcy proceedings. I.A.M. 14 Nat. Pension Fund, Plan A, A Benefits v. Slyman Indus., Inc., 901 15 F.2d 127, 129 (D.C. Cir. 1990); see also 11 U.S.C. §524(e) 16 (“[D]ischarge of a debt of the debtor does not affect the liability 17 of any other entity on . . . such debt.”) Indeed, a controlled 18 group constituting a single employer for MPPAA purposes “is a 19 defendant with many pockets. Were all members of the group 20 discharged [in bankruptcy] . . . would [be to] allow the defendant 21 to mark its front pockets bankrupt, while removing assets to its 22 23 24 25 26 27 28 7 (...continued) of a summary judgment motion brought by the Trustee claimant regarding S Diamond’s objection to the Trustee’s proof of claim. 8 Defendants’ citation to Board of Trustee of Trucking Employees of North Jersey Welfare Fund, Inc.- Pension Fund v. Able Truck Rental, 822 F.Supp. 1091 (D. New Jersey) is, therefore, inapposite. There, the court held only that a plaintiff could not pursue a separate judgment against one controlled group member when a final judgment had already been entered against another controlled group member. Able Truck Rental, 822 F.Supp. at 1095. 9 1 back pockets.” 2 Cir. 1991). 3 the MPPAA and ERISA. 4 Bd. of Trustees v. Michael's Floor Covering, Inc., 801 F.3d 1079, 5 1094 (9th Cir. 2015) (“A primary purpose of ERISA is to ensure that 6 employees and their beneficiaries [a]re not ... deprived of 7 anticipated retirement benefits by the termination of pension plans 8 before sufficient funds have been accumulated in the plans. 9 MPPAA's purpose is better to effectuate ERISA's purposes.”) 10 McDonald v. Centra, Inc., 946 F.2d 1059, 1065 (4th Such an approach would frustrate the purposes of both See Resilient Floor Covering Pension Tr. Fund The (internal quotation marks and citation omitted). 11 Accordingly, the pendency of bankruptcy proceedings regarding 12 S Diamond is no bar to Plaintiff’s case against Defendants. 13 14 15 16 IV. Conclusion For the reasons stated above, Plaintiffs’ Motion for Summary Judgment is GRANTED. 17 18 19 IT IS SO ORDERED. 20 21 22 Dated: October 4, 2017 23 DEAN D. PREGERSON 24 United States District Judge 25 26 27 28 10

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