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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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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BOARD OF TRUSTEES OF THE
CALIFORNIA IRONWORKERS FIELD
PENSION TRUST,

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Plaintiff,

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v.

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M.M. STEVENS, LLC, ET AL.,

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Defendants.
___________________________

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Case No. CV 16-07791 DDP (AJWx)

ORDER GRANTING PLAINTIFFS’ MOTION
FOR SUMMARY JUDGMENT
[Dkt. 45]

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Presently before the court is Plaintiffs’ Motion for Summary

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Judgment.

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heard oral argument, the court grants the motion and adopts the

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following Order.

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I.

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Having considered the submissions of the parties and

Background
Between June 1999 and July 2013, S Diamond Steel, Inc. (“S

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Diamond”) made contributions, pursuant to a collective bargaining

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agreement, to the California Ironworkers Field Pension Trust (“the

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Plan”), a multiemployer employee benefits plan within the meaning

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of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.

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§ 1002(37)(A).

S Diamond ceased making contributions to the Plan,

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and Plaintiff Board of Trustees of the California Ironworkers Field

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Pension Trust determined that S Diamond withdrew from the Plan as

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of July 31, 2013.1

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Multiemployer Pension Plan Amendments Act (“MPPAA”), Plaintiffs

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assessed withdrawal liability of $1,310,439.50 against S Diamond

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and notified S Diamond of the same.

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Fund for N.California v. Underground Const. Co., 31 F.3d 776, 778

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(9th Cir. 1994); 29 U.S.C. § 1381 et seq.

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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

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MPAA’s exclusive arbitration provision.

See, e.g. Operating

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Engineers’ Pension Trust Fund v. Clark's Welding & Mach., 688 F.

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Supp. 2d 902, 907 (N.D. Cal. 2010).

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At no time has S Diamond made any withdrawal liability
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payments.

S Diamond filed for Chapter 11 bankruptcy in the

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District of Arizona on July 11, 2016.

D. Ariz. Case No. 2:16-bk-

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07846.

That court, overruling S Diamond’s objection to Plaintiffs’

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proof of claim, has found S Diamond liable for withdrawal
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liability, liquidated damages, and attorneys fees in amounts to be
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determined at a later date.
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In the instant suit, Plaintiffs allege that Defendants are
jointly and severally liable for S Diamond’s liabilities because

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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.
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all three entities are members of the same controlled group.2

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the time S Diamond withdrew from the Plan, Matthew Stevens owned

At

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100% of S Diamond’s shares.

Matthew Stevens’ wife, Dana, owned

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over ninety percent of Defendant Milco Solutions, Inc. (“Milco”).
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Matthew and Dana Stevens collectively owned 100% of Defendant M.M.
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Stevens, LLC (“M.M. Stevens.”)
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Plaintiffs now move for summary judgment.

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II.

Legal Standard

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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.

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A party

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Once the moving party meets its burden, the burden shifts to

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the nonmoving party opposing the motion, who must “set forth

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specific facts showing that there is a genuine issue for trial.”

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Anderson, 477 U.S. at 256.

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party “fails to make a showing sufficient to establish the

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existence of an element essential to that party’s case, and on

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which that party will bear the burden of proof at trial.”

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477 U.S. at 322.

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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

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party,” and material facts are those “that might affect the outcome

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of the suit under the governing law.”

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There is no genuine issue of fact “[w]here the record taken as a

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whole could not lead a rational trier of fact to find for the

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nonmoving party.”

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Corp., 475 U.S. 574, 587 (1986).

Anderson, 477 U.S. at 248.

Matsushita Elec. Indus. Co. v. Zenith Radio

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It is not the court’s task “to scour the record in search of a
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genuine issue of triable fact.”

Keenan v. Allan, 91 F.3d 1275,

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1278 (9th Cir.1996).

Counsel have an obligation to lay out their

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support clearly.

Carmen v. San Francisco Sch. Dist., 237 F.3d

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1026, 1031 (9th Cir.2001).

The court “need not examine the entire

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file for evidence establishing a genuine issue of fact, where the
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evidence is not set forth in the opposition papers with adequate
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references so that it could conveniently be found.”

Id.

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III. Discussion
The central issue in this case is whether S Diamond, M.M.
Stevens, and Milco are “controlled group members.”

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Under the

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MPPAA, pension plans can impose withdrawal liability on employers

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that withdraw from a pension plan.

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for N. California v. Underground Const. Co., 31 F.3d 776, 778 (9th

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Cir. 1994); 29 U.S.C. § 1381 et seq.

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common control” are treated as a single employer and are jointly

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and severally liable for one another’s withdrawal liability.

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of Trustees of Western Conference of Teamsters Pension Trust Fund

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v. Lafrenz, 837 F.2d 892, 893 (9th Cir. 1988); 29 U.S.C. §

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1301(b)(1).

Carpenters Pension Trust Fund

Trades and businesses “under

Bd.

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A group of trades or businesses constituting a “brother-sister
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group” is considered to be under “common control.”

26 C.F.R.

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§1.1414(c)-2(a).

“The term ‘brother-sister group . . .’ means two

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or more organizations conducting trades or businesses if (i) the
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same five or fewer persons who are individuals, estates, or trusts
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own (directly and with the application of § 1.414(c)–4) a
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controlling interest in each organization, and (ii) taking into
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account the ownership of each such person only to the extent such
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ownership is identical with respect to each such organization, such
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persons are in effective control of each organization. . . .”

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C.F.R. § 1.414(c)-2(c); see also CMSH Co. v. Carpenters Tr. Fund
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for N. California, 963 F.2d 238, 240 (9th Cir. 1992).

Plaintiffs

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assert that S Diamond, M.M. Stevens, and Milco comprise a brother23
sister group, and therefore constitute a single employer under the
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MPPAA.
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Thus, Plaintiffs contend, M.M. Stevens and Milco are

jointly and severally liable for S Diamond’s withdrawal liability.3

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There is no dispute that each of the entities conducts a
trade or business.
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There appears to be no dispute as to who possessed what

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ownership interest in each of the entities.

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100% of S Diamond.

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Dana Stevens, owned over 90% of Milco.

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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.)

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Defendants argue that Milco is not part of a brother-sister
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group with S Diamond because (1) the same persons did not own a
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“controlling interest” in each alleged component organization and,
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(2) considering ownership of each corporation only to the extent
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such ownership was identical with respect to each organization,
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neither Matthew nor Dana Stevens was in “effective control” of each
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entity.5

In other words, Defendants argue that because Matthew

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Stevens owned all of S Diamond and his wife, Dana, owned 90% of
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Milco, neither of them had a controlling interest or effective
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control of both entities, and therefore the two entities are not
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members of a single brother-sister group.

(Opposition at 14.)

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“Ownership” under the relevant regulation includes both direct

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ownership and ownership under 26 C.F.R. §1.1414(c)-4.

26 C.F.R. §

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1.414(c)-2(c).

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individual shall be considered to own an interest owned . . . by or

Section 1.414(c)-4(b)(5)(ii) provides that “an

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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.)
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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).
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for his or her spouse.”

26 C.F.R. § 1.414(c)-4(b)(5)(ii).

Thus,

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Plaintiffs argue, Michael Stevens’ 100% interest in S Diamond is

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attributable to his wife, Dana Stevens, who therefore owns

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controlling interests in all three entities.6

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Defendants argue, however that an exception to the spousal
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attribution rule applies.

That exception applies if four

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conditions are met: (1) the non-owning spouse does not own any
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interest in an organization; (2) the non-owning spouse “is not a
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member of the board of directors, a fiduciary, or an employee of
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such organization and does not participate in the management of
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such organization . . .;” (3) not more than half of the
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organization’s income is derived from royalties, rents, dividends,
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interest, and annuities; and (4) the organization is not subject to
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conditions which limit the owning spouse’s right to dispose of his
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or her interest which run in favor of the non-owning spouse or the
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non-owning spouse’s children.

1.414(c)-4(b)(5)(ii).

Of these four

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conditions, only the second appears to be at issue.

Defendants

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assert, albeit without citation to the record, that “Dana was not a
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member of S Diamonds’ (sic) board of directors, was not a fiduciary
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of S Diamond and did not participate in the management of S
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Diamond.”

(Opposition at 18:16-19.)

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As an initial matter, Defendants’ argument appears to be

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inconsistent with Dana Stevens’ deposition testimony, in which she

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stated that her responsibilities at S Diamond included overseeing

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“payroll, insurance, accounts payable, [and] accounts receivable .

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See note 4, supra.
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. . .”

(Bedolla Decl., Ex. A at 32:4-5.)

Even assuming, however,

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that such responsibilities do not constitute “participation in the

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management” of S Diamond for purposes of the spousal attribution

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exception, there appears to be no dispute that Dana Stevens was an

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employee of S Diamond.

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“continuously employed by S. Diamond Steel, Inc. from 2000.”

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at 31:19-20.)

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among the other factors, the non-owning spouse is “not a member of

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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,

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organization.”

1.414(c)-4(b)(5)(ii)(B) (emphasis added).

In

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light of the undisputed evidence that, in Dana Stevens’ own words,

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she was an S Diamond employee, the spousal attribution exception

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does not apply.

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interest in S Diamond is attributable to Dana Stevens.

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Dana Stevens owned a controlling interest in Milco, M.M. Stevens,

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and S Diamond, no reasonable trier of fact could dispute that those

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entities were members of a single brother-sister group.

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Defendants are jointly and severally liable for S Diamond’s

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withdrawal liability.

Accordingly, Michael Stevens’ 100% ownership
Because

As such,

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B.

Effect of S Diamond Bankruptcy Proceedings

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S Diamond has filed for Chapter 11 bankruptcy in the District

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of Arizona.

D. Ariz. Case No. 2:16-bk-07846.

The bankruptcy court

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determined that S Diamond is liable for withdrawal liability,

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interest, liquidated damages, and attorneys’ fees, in an amount to

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be determined at a later date.7

(Declaration of Guy Bluff ¶ 13.)

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The bankruptcy court made this determination in the context
(continued...)
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Defendants argue that, in light of the procedural posture of the S

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Diamond bankruptcy proceeding, this court should not rule on

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Plaintiffs’ Motion for Summary Judgment because the amount of

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withdrawal liability will be determined in bankruptcy court.

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Defendants’ argument is not persuasive.

As an initial matter,

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there has been no final disposition in bankruptcy court, and the
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suggestion that the bankruptcy court’s determination regarding the
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amount of S Diamond’s liability may differ from the amount sought
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here is speculative at best.8

Furthermore, courts have rejected

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similar arguments.

As one court explained, bankruptcy proceedings

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“simply cannot affect the derivative legal liability of a
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nonbankrupt affiliate, any more than one joint tortfeasor would be
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protected because another is in bankruptcy proceedings.

I.A.M.

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Nat. Pension Fund, Plan A, A Benefits v. Slyman Indus., Inc., 901
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F.2d 127, 129 (D.C. Cir. 1990); see also 11 U.S.C. §524(e)
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(“[D]ischarge of a debt of the debtor does not affect the liability
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of any other entity on . . . such debt.”)

Indeed, a controlled

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group constituting a single employer for MPPAA purposes “is a
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defendant with many pockets.

Were all members of the group

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discharged [in bankruptcy] . . . would [be to] allow the defendant
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to mark its front pockets bankrupt, while removing assets to its
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(...continued)
of a summary judgment motion brought by the Trustee claimant
regarding S Diamond’s objection to the Trustee’s proof of claim.
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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.
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back pockets.”

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Cir. 1991).

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the MPPAA and ERISA.

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Bd. of Trustees v. Michael's Floor Covering, Inc., 801 F.3d 1079,

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1094 (9th Cir. 2015) (“A primary purpose of ERISA is to ensure that

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employees and their beneficiaries [a]re not ... deprived of

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anticipated retirement benefits by the termination of pension plans

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before sufficient funds have been accumulated in the plans.

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MPPAA's purpose is better to effectuate ERISA's purposes.”)

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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).

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Accordingly, the pendency of bankruptcy proceedings regarding
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S Diamond is no bar to Plaintiff’s case against Defendants.
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IV.

Conclusion
For the reasons stated above, Plaintiffs’ Motion for Summary

Judgment is GRANTED.

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IT IS SO ORDERED.

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Dated: October 4, 2017

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DEAN D. PREGERSON

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United States District Judge

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