Zoom Electric, Inc. v. International Brotherhood of Electrical Workers, Local 595

Filing 82

ORDER DENYING ZOOM ELECTRIC AND HORAKS 17 MOTION TO DISMISS, DENYING ZEIS 20 MOTION TO VACATE, DENYING HORAK AND ZEIS 60 MOTION TO DISMISS, GRANTING THE UNIONS 62 MOTION FOR LEAVE TO FILE A SECOND AMENDED COUNTER-COMPLAINT, AND GRANTING THE UNIONS 69 MOTION TO CONFIRM AND ENFORCE AND FOR PARTIAL SUMMARY JUDGMENT. Case Management Statement due by 5/2/2012. Case Management Conference set for 5/9/2012 02:00 PM. Signed by Judge Claudia Wilken on 3/20/2012. (ndr, COURT STAFF) (Filed on 3/20/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ZOOM ELECTRIC, INC., a California
corporation,
Petitioner,

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v.

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INTERNATIONAL BROTHERHOOD OF
ELECTRICAL WORKERS, LOCAL 595, a
labor organization, and DOES
1-20,

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Respondents.

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________________________________/

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INTERNATIONAL BROTHERHOOD OF
ELECTRICAL WORKERS, LOCAL 595, a
labor organization,

United States District Court
For the Northern District of California

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Counter-Plaintiff,
v.
ZOOM ELECTRIC, INC., a California
corporation; VEIKO HORAK,
individually and as the alter-ego
of ZOOM ELECTRIC, a sole
proprietorship; and DOES ONE
through TEN, inclusive,

No. C 11-1699 CW
ORDER DENYING ZOOM
ELECTRIC AND
HORAK’S MOTION TO
DISMISS, Docket
No. 17, DENYING
ZEI’S MOTION TO
VACATE, Docket No.
20, DENYING HORAK
AND ZEI’S MOTION
TO DISMISS, Docket
No. 60, GRANTING
THE UNION’S MOTION
FOR LEAVE TO FILE
A SECOND AMENDED
COUNTER-COMPLAINT,
Docket No. 62, AND
GRANTING THE
UNION’S MOTION TO
CONFIRM AND
ENFORCE AND FOR
PARTIAL SUMMARY
JUDGMENT, Docket
No. 69

Counter-Defendants.
________________________________/
Petitioners and Counter-Defendants Zoom Electric, Inc. (ZEI)

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and Vieko Horak seek dismissal of the counter-claims of Respondent
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and Counter-claimant International Brotherhood of Electrical
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Workers, Local 595 (the Union) and to vacate an arbitration award
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against it and in favor of the Union.

The Union opposes these

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motions, seeks to confirm and enforce the arbitration award, and
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moves for summary judgment on its counter-claim against ZEI and
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Horak for failure to make benefit contributions pursuant to 29

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U.S.C. §§ 301, 1132 and 1145.

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file a second amended counter-complaint.

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of the Union’s motions.

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parties and their oral arguments, the Court DENIES ZEI and Horak’s

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motions and GRANTS the Union’s motions.

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United States District Court
For the Northern District of California

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The Union also requests leave to
ZEI and Horak oppose all

Having considered the papers filed by the

BACKGROUND
The parties do not dispute the material facts, which are set
forth below.
ZEI’s corporate status was suspended at all times relevant,

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until it was revived on July 11, 2011.

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IBEW’s First Request for Judicial Notice (1RJN), Docket No. 27,

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Ex. D.

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and its agent for service of process, and his address was the same

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as ZEI’s address.

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registered to do business under the fictitious business name “Zoom

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Electric” in the City and County of San Francisco.

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Horak Decl. ¶ 2, Ex. A;

At all times relevant, Vieko Horak was ZEI’s sole owner

Id.

Since June 29, 2005, Horak has also been

1RJN, Ex. E.

The Union is a party to a Project Labor Agreement (PLA),

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which governs the wages and hours, and terms and conditions of

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employment, for construction work at the Oakland Unified School

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District (OUSD).

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September 8, 2010, Horak signed a Letter of Assent on behalf of

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ZEI, agreeing to be bound by the terms of the PLA while performing

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work on OUSD construction projects.

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Decl. ¶ 9, Ex. C.

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license number as C10 857743 on the Letter of Assent.

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Decl. ¶ 9, Ex. C.

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individual contractor license number, which was registered for him

Maloon Decl. ¶ 3, Ex. A (PLA).

On or about

Martin Decl. ¶ 3; Maloon

Horak listed ZEI’s California contractor
Maloon

This number was not ZEI’s but was Horak’s

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to do business as “Zoom Electric.”

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B; Maloon Decl. ¶ 19.

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2011, ZEI applied for its own contractor license; the State

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rejected its application on September 19, 2011.

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Request for Judicial Notice (2RJN), Ex. A.

Horak Decl. ¶ 3; 1RJN, Exs. A,

More than a year later, on September 12,

IBEW’s Second

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The PLA sets forth certain requirements with which

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contractors must comply to hire workers for covered projects,

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including that contractors must hire Union members who are out of

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work, in a one-to-one ratio with the contractor’s own employees;

United States District Court
For the Northern District of California

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hiring of either must take place through a referral from the

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Union.

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first hire a Union worker, then may hire the contractor’s own

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qualified worker through a referral from the Union, then may hire

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a second Union worker, then a second of the contractor’s workers,

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and so on, until the contractor has a sufficient crew for the job

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or he has hired ten of his own workers.

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the contractor, the contractor’s employees must first apply to the

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Union to work on the project and must meet certain qualifications.

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Id.

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executives, managerial employees, engineering employees,

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supervisors . . ..”

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PLA ¶ 8.1.

According to this system, the contractor must

Id.

To be referred to

The PLA excludes from this requirement “a Contractor’s

Id. ¶ 2.7.

All contractors who are signatories to the PLA are obliged to

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provide conditions of employment, and wages and benefits at

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certain specified rates, in accordance with the PLA.

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¶¶ 9.3-9.4.

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established vacation, pension or other form of deferred

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compensation plan, apprenticeship, and health benefit funds for

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each hour worked on the Project” in certain specified amounts.

Id. at

Contractors also agree to “pay contributions to the

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Id. at ¶ 9.1.

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consists of the Alameda County Inside Construction Agreement, and

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which establishes eight employee benefit trust funds.

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¶ 9.2; Maloon Decl. ¶ 7, Ex. B.

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The amounts are set forth in Schedule A, which

Id. at

The PLA further provides that it is “the responsibility of

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the Contractor(s) and Unions to investigate and monitor compliance

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with the provisions of the agreement” described above.

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X.

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be construed to interfere with or supersede the usual and

PLA Art.

The PLA specifically states, “Nothing in this agreement shall

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For the Northern District of California

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customary legal remedies available to the Unions and/or employee

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benefit Trust Funds to collect delinquent Trust Fund contributions

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from Contractors on the Project.”

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Id.

The PLA also establishes a “grievance arbitration procedure.”

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See id. at Art. XII.

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to resolve a dispute arising “out of the meaning, interpretation

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or application of the provisions of this Agreement, including the

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Schedule A agreements” by meeting and conferring about the dispute

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(Step 1), they are required to submit the dispute to the Joint

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Administrative Committee (JAC), which must meet “to confer in an

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attempt to resolve the grievance” (Step 2).

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If the dispute is not resolved within the time allowed for

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resolution by the JAC, either party may refer the dispute to an

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arbitrator within five days (Step 3).

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arbitrator must conduct a hearing on the dispute and give the

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parties a binding decision within five days after the hearing.

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Id.

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authority to change, amend, add to or detract from any of the

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provisions of the Agreement.”

Under the procedure, if parties are unable

Id. at ¶¶ 12.1, 12.2.

Id. at ¶ 12.2.

The

The PLA specifies that the “Arbitrator shall have no

Id.
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On October 14, 2010, three ZEI employees began electrical

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work on a fire alarm replacement project at Roosevelt Middle

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School in the OUSD.1

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These included: Horak, owner and Chief Executive Officer of ZEI;

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Aleh Holdvekht, project manager; and Valentin Penkin, electrical

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wiring supervisor.

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Martin Decl. ¶¶ 2, 4; Maloon Decl. ¶ 11.

Martin Decl. ¶ 4.

On December 20, 2010, a Union representative, Matt Maloon,

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visited Roosevelt Middle School and observed Holdvekht and Penkin

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working without any accompanying Union workers.

Martin Decl. ¶ 4;

United States District Court
For the Northern District of California

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Maloon Decl. ¶ 11.

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procedures contained in the PLA for ZEI’s work in October through

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December 2010.

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Union’s grievance alleged that, during this period, ZEI failed to

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comply with the PLA’s referral process and that ZEI failed to make

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contributions to the trust funds on behalf of the employees who

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had worked on the project.

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demanded payment for the wages that should have gone to Union

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workers and for employee benefit contributions for all hours

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worked on the project.

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The Union subsequently began the grievance

Martin Decl. ¶¶ 5-6; Maloon Decl. ¶ 12.

Maloon Decl. ¶ 12, Ex. D.

The

The Union

Id.

On or about January 24, 2011, ZEI ordered labor from the
Union and journeyman electricians Wilberto Cuellar-Arandia and

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Throughout the events relevant to the Roosevelt Middle
School project and subsequent JAC proceedings, Horak used both the
names Zoom Electric and Zoom Electric, Inc. indiscriminately.
See, e.g., Thomas Decl. ¶ 6, Ex. F (documents created or signed by
Horak for the Roosevelt Middle School job listing both Zoom
Electric and Zoom Electric, Inc.). Because the Court finds that
Horak would be individually liable for the judgments against
either entity, the Court need not resolve which entity took which
particular actions. The Court will use ZEI to refer to both,
unless otherwise specified.
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Douglas R. Lindsey were dispatched to the Roosevelt Middle School

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fire alarm replacement job.

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Maloon Decl. ¶ 14.

The JAC held a hearing on January 31, 2011 on the Union’s

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grievance about the October through December 2010 violations and

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subsequently accepted written briefs from the parties.

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Decl. ¶ 15.

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disputed only the amount of money for which it should be liable.

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Maloon Decl. ¶ 17, Ex. G.

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exempt from coverage by the PLA, because they performed managerial

Maloon

ZEI did not dispute that it had violated the PLA and

ZEI argued that its employees were

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For the Northern District of California

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work.

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recover “double benefits” contributions to the trust funds instead

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of the amount that the trust funds would have received had ZEI

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complied with the PLA, because the Union sought one award for the

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benefits contribution and a second award for wages, which also

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included a benefits contribution.

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it should be penalized only for the number of hours that Union

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workers would have worked had ZEI complied with the referral

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process.

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Id.

ZEI also contended that the Union was seeking to

Id.

Finally, ZEI argued that

Id.

On or about February 18, 2011, B-side, Inc., the general

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contractor on the Roosevelt Middle School project, and ZEI

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submitted to the trust funds reports of hours worked under the PLA

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in the form of ZEI records for the month of January 2011.

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Decl. ¶ 16, Ex. E.

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fringe benefit contributions on behalf of Cuellar-Arandia and

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Lindsey for thirty-two hours of work each.

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35.

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check from ZEI in the amount of $1,961.88, which the Union

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forwarded to the trust funds.

Maloon

The reports stated that ZEI owed $1,961.88 in

Id.; Horak Depo., Ex.

On or about February 20, 2011, the Union received a timely

Maloon Decl. ¶16, Ex. F; Horak
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Depo., Ex. 36.

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Cuellar-Arandia and Lindsay each worked eight hours for ZEI during

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the month of January, which ZEI did not report and for which ZEI

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did not make fringe benefit contributions.

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37-38.

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the project in January 2011, which ZEI did not report and for

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which ZEI did not make fringe benefit contributions, though

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payment of these contributions was required by the PLA.

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United States District Court
For the Northern District of California

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In addition to the thirty-two hours reported,

Horak Depo., Ex.

ZEI’s employee, Penkin, also worked thirty-two hours on

The JAC issued a decision on February 22, 2011.
¶ 17, Ex. G.

Id.

Maloon Decl.

The JAC stated in relevant part,

The JAC considered both the position of the UNION and
the EMPLOYER with regard to the payment of Trust Fund
benefits on behalf of workers of Zoom Electric, Inc.
that worked[] hours in violation of the PLA. The
EMPLOYER states that the payment of hours represents a
payment of “double benefits” to the UNION. In fact,
after review of Article IX, Wages, Benefits And Working
Conditions, it is clear to the JAC that the benefit
payments [do] not go to the benefit of the Union, but
rather, specifically they go to the benefit of workers
who are entitled to the accrued benefits of such
contributions. For the JAC to not acknowledge that fact
would contribute to further victimization of those
workers.
The JAC also considered the position taken by the
EMPLOYER which would only penalize a violating
contractor for hours in the proper ratio as required by
Article VIII, Referral. . . . To accept this premise
would be to accept a significant flaw with regard to
enforcement of the PLA. Employers that violated the PLA
with regard to proper dispatch would only be held to
account, as if they had properly dispatched and had not
violated the PLA. That would only create an enticement
to violate the PLA . . .
Id. at 5-6.

The JAC rejected ZEI’s argument that some of the

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hours worked should have been considered exempt by the PLA as
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managerial work, relying on ZEI’s certified payroll records which
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indicated hours covered by the PLA and which were signed under
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penalty of perjury by Horak.

Id. at 6.

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The JAC ordered ZEI to pay as follows:

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Payment to workers on the IBEW 595 Available for Work
list of 1648 hours totaling $116,299.36
Payment on behalf of employees of Zoom Electric, Inc. to
the IBEW, 595 Trust Funds totaling $42,963.36 for hours
worked in violation of the PLA.

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Id.

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ZEI continued to employ Union labor until sometime in March

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2011.

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hours worked by these individuals to the trust funds or paid the

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fringe benefit contributions owed on account of the hours worked.

Maloon Decl. ¶ 18.

Neither ZEI nor B-side, Inc. reported

United States District Court
For the Northern District of California

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Id.

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sixteen hours each and Penkin worked thirty-two hours.

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Depo., Exs. 37-38.

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During February 2011, Cuellar-Arnadia and Lindsey worked
Horak

On April 6, 2011, ZEI filed the instant action seeking to

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vacate the JAC award, and subsequently amended its pleadings on

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April 29, 2011.

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Docket Nos. 1, 11.

On May 6, 2011, the Union answered ZEI’s amended pleading and

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filed a counter-complaint for confirmation and enforcement of the

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JAC award against both ZEI and Horak.

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Docket Nos. 15, 16.

On June 27, 2011, Horak and Zoom Electric, as a sole

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proprietorship, filed a motion pursuant to Federal Rule of Civil

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Procedure 12(b)(1) and (6) to dismiss the Union’s counter-claims.

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Docket No. 17.

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JAC award, seeking an order that the parties proceed to Step 3 of

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the PLA’s grievance arbitration procedure.

On June 29, 2011, ZEI filed a motion to vacate the

Docket No. 20.

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On October 20, 2011, the Court granted the Union’s motion for

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leave to file a first amended counter-complaint, adding a cause of

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action against ZEI and Horak alleging that they had failed to make

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benefit contributions for work performed under the PLA for January

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through March 2011.

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Docket No. 54.

On November 8, 2011, ZEI and Horak filed a motion to dismiss

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the Union’s cause of action related to January through March 2011,

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arguing that the Union had failed to exhaust administrative

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remedies in relation to that charge.

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day, the Court set a briefing and hearing schedule as to the

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previously filed dispositive motions.

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Docket No. 60.

On that same

Docket No. 62.

On November 30, 2011, the Union filed a motion for leave to

United States District Court
For the Northern District of California

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file a second amended counter-complaint.

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Union seeks to add B-Side, Inc. as a Counter-Defendant, to hold it

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liable for both claims as the general contractor to subcontractor

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ZEI pursuant to California Labor Code § 2750.5.

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seeks to add as Counter-Plaintiffs the trust funds themselves,

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Alameda County Electrical Industry Service Corporation (EISC),

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which serves as the collection agent for the trust funds, and

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Victor Uno and Don Campbell, who serve as trustees for the trust

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funds and officers of EISC.

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Docket No. 62.

The

The Union also

On December 8, 2011, the Union filed a consolidated

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opposition to ZEI and Horak’s pending motions, a cross-motion for

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confirmation and enforcement of the JAC award and a motion for

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summary judgment against ZEI and Horak on its counter-claim

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related to benefit contributions in January and February 2011.

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Docket No. 69.

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United States District Court
For the Northern District of California

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DISCUSSION
I.

Cross-motions to vacate or to confirm and enforce the
arbitration award against ZEI
In its consolidated opposition to the Union’s motion to

confirm and enforce and its reply to the Union’s opposition to the
motion to vacate (Consolidated Opposition and Reply), ZEI
clarifies that it seeks to vacate the JAC award only in part.

In

its original motion to vacate, ZEI argued that the JAC exceeded
its arbitration powers by finding that its employees were not
exempt under PLA ¶ 2.7 and awarding the Union compensation for the
wages of all three of its employees, instead of merely for the two
Union workers it would have been required to hire had it complied
with the PLA hiring and dispatch requirements.
Vacate, at 9.

See Mot. to

However, in the Consolidated Opposition and Reply,

ZEI concedes that “courts are not permitted to review the merits
of these types of findings in labor arbitration awards” and states
that it is only challenging as punitive the JAC’s award of
$42,963.36 in fringe benefits contributions.

Consolidated

Opposition and Reply, at 1, 5.
ZEI’s argument for vacating the $42,963.36 award for trust
fund contributions is that the award is punitive when considered
in combination with the $116,299.36 award; ZEI, however, changes
its reasoning as to why a punitive award should be vacated.

In

its Motion to Vacate, ZEI argues that a punitive award does not
“draw its essence” from the PLA, because punitive damages are not
specifically authorized by the PLA.

Mot. to Vacate, at 8-11.

In

the Consolidated Opposition and Reply, ZEI argues that punitive

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damages in a labor arbitration award violate public policy.

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Consolidated Opposition and Reply, at 4-12.

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“In general, courts reviewing the decision of a labor

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arbitrator are required to accord an arbitrator’s decision a

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‘nearly unparalleled degree of deference.’”

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Machinists Auto. Trades Dist. Lodge No. 190, 244 F. Supp. 2d 1031,

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1033 (N.D. Cal. 2003) (quoting Stead Motors of Walnut Creek v.

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Auto. Machinists Lodge No. 1173, Int’l Ass’n of Machinists &

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Aerospace Workers, 886 F.2d 1200, 1205 (9th Cir. 1989)).2

SSA Terminals v.

“When

United States District Court
For the Northern District of California

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reviewing the award of an arbitrator chosen by the parties to a

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collective bargaining agreement, we are bound--under all except

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the most limited circumstances--to defer to the decision of

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another even if we believe that the decision finds the facts and

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states the law erroneously.”

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Stead Motors, 886 F.2d at 1204.

“The reason for this unusually high degree of deference is

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that the arbitrator’s decision is deemed to be part of the

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parties’ agreement.”

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the Ninth Circuit explained in Stead Motors,

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SSA Terminals, 244 F. Supp. 2d at 1033.

As

Unlike the commercial contract, which is designed to be
a comprehensive distillation of the parties’ bargain,
the collective bargaining agreement is a skeletal,
interstitial document. The labor arbitrator is the
person the parties designate to fill in the gaps; for
the vast array of circumstances they have not considered
or reduced to writing, the arbitrator will state the
parties’ bargain. . . .
Since the labor arbitrator is designed to function in
essence as the parties’ surrogate, he cannot
“misinterpret” a collective bargaining agreement.

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The Union asserts that review of the decision of the JAC is
governed by the same standards as those for an arbitrator’s award.
See Opp. to Mot. to Vacate and Dismiss and Cross-Mot. for Summ. J.
7 n.8. ZEI does not dispute this.
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. . . Thus, what courts do when they review an
arbitrator’s award is more akin to the review of a
contract than of the decision of an inferior tribunal:
the award, just as a contract, is the expression of the
parties’ will and must be enforced as expressed unless
illegal or otherwise void.
Stead Motors, 886 F.2d at 1205-06 (citations omitted).

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The Ninth Circuit has “identified narrow exceptions to [the]

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general rule” that labor arbitration awards are entitled to great

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deference, and has held that “[v]acatur of an arbitration award

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under section 301 of the LMRA is warranted: (1) when the award

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does not draw its essence from the collective bargaining agreement

United States District Court
For the Northern District of California

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and the arbitrator is dispensing his own brand of industrial

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justice; (2) where the arbitrator exceeds the boundaries of the

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issues submitted to him; (3) when the award is contrary to public

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policy; or (4) when the award is procured by fraud.”

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Co. v. Util. Workers Union, Local 132, 265 F.3d 787, 792-793 (9th

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Cir. 2001) (internal citations omitted).

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clearly stated that both the “draw its essence” and the “public

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policy” exceptions are extremely narrow.

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F.2d at 1208 n.8 (stating that for both exceptions, “judicial

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scrutiny of an arbitrator’s decision is extremely limited”).

S. Cal. Gas

The Ninth Circuit has

See Stead Motors, 886

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Under the “draws its essence” exception,

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[t]he arbitrator’s factual determinations and legal
conclusions generally receive deferential review as long
as they derive their essence from the [collective
bargaining agreement]. If, on its face, the award
represents a plausible interpretation of the contract,
judicial inquiry ceases and the award must be enforced.
This remains so even if the basis for the arbitrator’s
decision is ambiguous and notwithstanding the
erroneousness of any factual findings or legal
conclusions.

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Sheet Metal Workers Int’l Ass’n, Local No. 359 v. Arizona Mech. &

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Stainless, Inc., 863 F.2d 647, 653 (9th Cir. 1988) (citations

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omitted).

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Similarly, to “vacate an arbitration award on public policy

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grounds, a court must find: (1) that an ‘explicit, well-defined

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and dominant’ public policy exists, and (2) ‘that the policy is

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one that specifically militates against the relief ordered by the

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arbitrator.’”

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Stead Motors, 886 F.2d at 1212-1213).

SSA Terminals, 244 F. Supp. 2d at 1035 (quoting
Such a public policy must

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For the Northern District of California

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“be ascertained by reference to the laws and legal precedence and

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not from general considerations of supposed public interests.”

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United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 43

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(1987) (internal quotation marks omitted).

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Under either exception, ZEI’s argument fails.

First, the

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award was compensatory in nature, not punitive, and drew its

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essence from the PLA itself.

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constitutes “unjust enrichment of $42,936.36,” because it

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“included two separate fringe contributions for the very same work

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hours.”

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this result by reasoning that, because the $116,299.36 award to

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workers included fringe benefit contributions, a separate fringe

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benefits award was redundant.

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However, as the Union points out, the JAC considered this argument

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and explicitly made each award to remedy different wrongs that

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affected distinct groups of individuals.

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G, at 5-6.

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ZEI argues that the JAC’s award

Consolidated Opposition and Reply, at 1.

ZEI arrives at

See Mot. to Vacate, 10-11.

Maloon Decl. ¶ 17, Ex.

The JAC awarded $116,299.36 to “workers on the IBEW 595
Available for Work list” for hours that they should have been
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working but were not because of ZEI’s failure to abide by the

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PLA’s referral provisions.

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wages and fringe benefit contributions for these “Available for

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Work list” workers for these lost work hours.

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Counter-compl. ¶ 20; Answer to Counter-compl. ¶ 20.

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Id.

The $116,299.36 award included

Id.; see also

The JAC made the $42,963.36 award “on behalf of employees of

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Zoom Electric, Inc. to the IBEW, 595 Trust Funds” for the hours

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that these ZEI employees did in fact work and for which they were

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entitled to have a fringe benefits contribution made on their

United States District Court
For the Northern District of California

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behalf to the trust funds.

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This award remedied ZEI’s failure to comply with the benefits

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provisions for those workers it did actually employ.

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Maloon Decl. ¶ 17, Ex. G, at 5-6.

Id.

It is true that ZEI would have only had to make fringe

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benefit contributions once, had it complied with the PLA.

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because its failure to do so implicated the benefits of two

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separate sets of workers, the JAC determined that ZEI had to make

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amends to both groups in order fully to remedy its improper

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conduct.

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that fact would be to contribute to the further victimization of

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those workers.”

21

But

As the JAC aptly stated, “For the JAC to not acknowledge

Maloon Decl. ¶ 17, Ex. G, at 6.

Thus, each of these awards was compensatory in nature and

22

drew its essence from the PLA.

23

use of the word “penalize” means that the awards were punitive,

24

ZEI misstates the JAC’s decision.

25

when discussing the purportedly duplicative fringe benefit award,

26

as ZEI represents.

27

ZEI’s argument that ZEI should only be required to pay damages for

28

the two Union workers that it would have had to hire under the

While ZEI argues that the JAC’s

The JAC did not use this word

Instead, the JAC used this word in addressing

14

dispatch ratio had it complied with the PLA.

2

stated, ZEI does not dispute in its reply that it should have to

3

pay wages for all three workers.

4

that the JAC’s decision that ZEI should be required to pay the

5

wages of three workers, instead of two, was punitive instead of

6

compensatory.

7

that would have allowed it to request that the Union dispatch its

8

own workers, and its employees did not apply to the Union to be

9

dispatched; thus, had ZEI utilized Union labor as required under

10
United States District Court
For the Northern District of California

1

the PLA, the Union would have dispatched three workers from its

11

list of Union members available for work.

12

As previously

Further, there is no evidence

ZEI did not comply with the requirements of the PLA

Further, even if the JAC’s award were punitive, ZEI has not

13

established that such an award should be vacated as contrary to

14

public policy.

15

collective bargaining agreement is sufficiently broad to include,

16

even arguably, the power to award punitive damages, a court must

17

defer to the arbitrator’s self-interpreted authority to assess

18

such damages.

19

Goss Golden West Sheet Metal, Inc. v. Sheet Metal Workers Int’l

20

Union, Local 104, 933 F.2d 759, 764 (9th Cir. 1991)).

21

recognizes that the PLA broadly directs the JAC “to resolve the

22

grievance.”

23

expressly limits the remedies available to “only ‘normal contract

24

remedies’ when recovering delinquent trust fund benefits.”

25

Consolidated Opposition and Reply, at 10.

26

ZEI concedes that, in the Ninth Circuit, if a

Consolidated Opposition and Reply, at 12 (citing

PLA ¶ 12.2.

ZEI also

ZEI, however, argues that the PLA

The PLA, however, contains no such restriction.

ZEI cites to

27

Article X, which does not limit the remedies available to the

28

Union but instead expressly states that the PLA does not interfere
15

with the other remedies or rights that it may have.

2

X (“Nothing in this agreement shall be construed to interfere with

3

or supersede the usual and customary legal remedies available to

4

the Unions and/or employee benefit Trust Funds to collect

5

delinquent Trust Fund contributions from Contractors on the

6

Project.”).

7

contract remedies,” it does not do so to limit the remedies

8

available here, as ZEI purports.

9

“It is agreed . . . with respect to contractors delinquent in

10
United States District Court
For the Northern District of California

1

trust or benefit contribution payments, that nothing in this

11

Agreement shall affect normal contract remedies available under

12

the local collective bargaining agreements against general

13

contractors or upper-tier subcontractors signatory to those

14

agreements for recovery of subcontractor delinquencies.”

15

terms, this section refers to the remedies available when bringing

16

actions against general contractors or higher-level subcontractors

17

for delinquencies of their subcontractors, and is inapplicable to

18

the claims against ZEI here.

19

available in those situations to those expressly stated, but

20

instead provides that the PLA does not interfere those remedies.

21

ZEI’s citation to section 3.4 of the PLA, which states, “No

22

practice, custom, understanding or agreement between a Contractor

23

and a Union party that is not specifically set forth in this

24

Agreement or in its appended Schedule A Agreements will be binding

25

on any other party unless agreed to in writing by the Parties,” is

26

also unavailing.

27

extra-contractual agreement, but rather to enforce a JAC award

28

issued through the grievance process set forth in the PLA.

See PLA Art.

While it is true that the PLA refers to “normal

In section 3.7, the PLA states,

By its

Further, it does not limit remedies

The Union does not seek to enforce any

16

Thus,

1

because the PLA broadly grants the JAC the power “to resolve the

2

grievance” without a limitation on the remedies that it may award,

3

this Court cannot hold that the broad grant of power to the JAC

4

did not “even arguably include the power to make an award of

5

punitive damages.”

6

Goss, 933 F.2d at 764.

ZEI has not demonstrated that this Court should depart from

7

the great deference normally accorded to labor arbitration awards.

8

Accordingly, the Court DENIES ZEI’s motion to vacate the

9

arbitration award and GRANTS the Union’s motion to confirm and

United States District Court
For the Northern District of California

10

enforce the award against ZEI.

11

II.

12

ZEI and Horak’s motion to dismiss, and the Union’s motion for
summary judgment on, the Union’s second cause of action
against ZEI and Horak

13

The Union seeks summary judgment in its favor on the second

14

cause of action in its amended counter-complaint against ZEI for

15

failure to make fringe benefit contributions in January and

16

February 2011.

17

the alter-ego of ZEI.

18

factual allegations or supporting evidence; instead, they move to

19

dismiss the claim and argue that the Union failed to exhaust the

20

administrative remedies mandated by the arbitration clause as

21

required by the Employee Retirement Income Security Act of 1974

22

(ERISA), 29 U.S.C. § 1001, et seq., prior to bringing suit.

23

The Union also seeks to hold Horak responsible as
ZEI and Horak do not dispute the Union’s

ZEI and Horak’s arguments fail for several reasons.

First,

24

as quoted above in Article X, the PLA expressly reserves to the

25

Union the right to bring statutory actions to recover delinquent

26

fringe benefit contributions and states that nothing in the PLA

27

shall interfere with its right to do so.

28

Pipe Trades Health & Welfare Trust Fund v. Temecula Mech., Inc.,
17

See Trs. of the S. Cal.

1

438 F. Supp. 2d 1156, 1172-1173 (C.D. Cal. 2006) (finding that

2

exhaustion of administrative remedies was not required in an ERISA

3

trust fund contributions case when the collective bargaining

4

agreement contained a provision stating that the plaintiffs’

5

rights to bring a court action were not limited or restricted by

6

the procedures therein).

7

and Horak rely involve agreements that were understood to require

8

arbitration.

9

GCIU-Emp’r Ret. Ben. Plan, 917 F.2d 1184, 1186 (9th Cir. 1990)

In contrast, the cases upon which ZEI

See Graphic Commc’ns Union, Dist. Council No. 2 v.

United States District Court
For the Northern District of California

10

(“The Union and the Plan agree that this provision is for

11

mandatory arbitration.”) (emphasis in original).

12

Further, the Union here seeks recovery on behalf of the trust

13

funds, and seeks to add the trust funds as Counter-Plaintiffs,

14

which is unopposed by ZEI and Horak.

15

“in the absence of an unambiguous expression by the parties to the

16

contrary, pension funds are not required to exhaust collective

17

bargaining agreement arbitration procedures prior to filing an

18

action for collection of delinquent contributions to the pension

19

fund.”

20

(quoting Flynn v. Interior Finishes, Inc., 425 F. Supp. 2d 38, 48

21

n.11 (D.D.C. 2006)).

22

v. Bla-Delco Constr., 8 F.3d 1365, 1369 (9th Cir. 1993) (trust

23

fund not required to arbitrate prior to bringing action to collect

24

contributions where this was not expressly mandated by any

25

agreement to which the fund was a party); see also Schneider

26

Moving & Storage Co. v. Robbins, 466 U.S. 364, 372 (1984) (holding

27

that “the presumption of arbitrability is not a proper rule of

28

construction in determining whether arbitration agreements between

Courts have recognized that,

Flynn v. Dick Corp., 481 F.3d 824, 833 (D.C. Cir. 2007)

See Carpenters Health & Welfare Trust Fund

18

1

the union and the employer apply to disputes between trustees and

2

employers, even if those disputes raise questions of

3

interpretation under the collective-bargaining agreements”).

4

Finally, to argue that exhaustion is required here, ZEI and

5

Horak rely heavily on cases that address an exhaustion requirement

6

in the context of plan participants or beneficiaries bringing

7

claims for benefits under the terms of an ERISA plan, rather than

8

on cases that address a Union or a trust fund seeking delinquent

9

contributions pursuant to 29 U.S.C. §§ 1132 and 1145.

See, e.g.,

United States District Court
For the Northern District of California

10

Chappel v. Laboratory Corp. of Am., 232 F.3d 719 (9th Cir. 2000);

11

Diaz v. United Agric. Employee Welfare Benefit Plan & Trust, 50

12

F.3d 1478 (9th Cir. 1995); Amato v. Bernard, 618 F.2d 559 (9th

13

Cir. 1980).

14

holding of Amato, the first case in the Ninth Circuit addressing

15

exhaustion in the ERISA context, as “federal courts should usually

16

require that parties seeking a review of a decision by an employee

17

benefit plan’s administrator first seek review of that decision

18

from the plan’s trustees”).

See also Graphic, 917 F.2d at 1187 (summarizing the

19

ZEI and Horak present no authority to support that this

20

court-created doctrine has been applied in actions for delinquent

21

trust fund contributions, and do not argue that the same reasoning

22

that motivated courts to create the requirement are present here.

23

In Amato, which involved an ERISA claim for benefits under a union

24

pension plan, the Ninth Circuit predicated its holding that

25

exhaustion generally should be required in such cases on specific

26

findings, including that Congress had included in ERISA a

27

requirement that plans must “provide administrative remedies for

28

persons whose claims for benefits have been denied” and authorized
19

1

the Secretary of Labor to promulgate regulations governing such

2

procedures.

3

include in ERISA a requirement that plans establish such

4

administrative remedies for the collection of delinquent trust

5

fund contributions; instead, Congress enacted 29 U.S.C. § 1145,

6

which “created a cause of action under ERISA for proceeding

7

against an employer who is delinquent in making contributions to a

8

plan.”

9

(9th Cir. 1999).

Amato, 618 F.2d at 567.

Congress, however, did not

Local 159 v. Nor-Cal Plumbing, Inc., 185 F.3d 978, 983
See also Trs. of the Screen Actors Guild--

United States District Court
For the Northern District of California

10

Producers Pension & Health Plans v. NYCA, Inc., 572 F.3d 771, 776

11

(9th Cir. 2009)).

12

Further, in Amato, the Ninth Circuit recognized that Congress

13

enacted the statutory requirement that plans provide

14

administrative remedies for benefit claims for a variety of

15

reasons, including “to promote the consistent treatment of claims

16

for benefits; to provide a nonadversarial method of claims

17

settlement; and to minimize the costs of claims settlement for all

18

concerned.”

19

acknowledged that ERISA granted the trustees broad fiduciary

20

rights and responsibilities to the plans and that requiring

21

exhaustion of administrative remedies both allowed the trustees to

22

undertake their duties without premature judicial interference in

23

their decision-making process and allowed the courts to benefit

24

from the trustees’ prior consideration and evaluation of the

25

claim.

26

concerns are present in actions which are not claims for benefits

27

and in which the trustees are plaintiffs seeking to enforce

28

statutory obligations of employers.

Amato, 618 F.2d at 567.

Id. at 567-68.

The Ninth Circuit also

ZEI and Horak make no showing that such

20

1

Accordingly, the Court finds that the Union was not required

2

to exhaust administrative remedies prior to bringing its second

3

cause of action.

4

dismiss this claim and GRANTS the Union’s motion for summary

5

judgment in its favor on this claim against ZEI.

6

liability as the alter-ego for ZEI is addressed below in Section

7

Three.

8

III. Horak and sole proprietorship Zoom Electric’s motion to
dismiss the Union’s counter-claims and the Union’s motions to
enforce the award against Horak and for summary judgment on
its second cause of action against Horak

9

United States District Court
For the Northern District of California

10

The Court DENIES ZEI and Horak’s motion to

Horak’s

Horak and Zoom Electric, as a sole proprietorship, seek to

11

dismiss the Union’s counter-claims against them on the bases that

12

they were not signatories to the PLA or parties to the JAC award

13

and that the counter-complaint does not allege sufficient facts to

14

support a finding that Horak was the alter ego of ZEI or Zoom

15

Electric.

16

award against Horak, and summary judgment against Horak on its

17

second cause of action, by piercing the corporate veil and holding

18

Horak accountable for actions that he took on behalf of Zoom

19

Electric, Inc. while its corporate status was suspended.

20

The Union in turn seeks to enforce the arbitration

As the sole owner of Zoom Electric, Horak “is personally

21

liable for all debts and responsibilities incurred by the

22

business.”

23

LEXIS 6210, at *9 (E.D. Cal.) (citing Century Sur. Co. v. Polisso,

24

139 Cal. App. 4th 922, 943 (2006)).

25

Wuxi Taihu Tractor Co., 632 F.3d 399, 403 (7th Cir. 2011) (“A

26

proprietorship is just a name that a real person uses when doing

27

business; it is not a juridical entity. . . .

Paradise Northwest, Inc. v. Randhawa, 2012 U.S. Dist.

28
21

See also York Group, Inc. v.

The only entity is

1

the proprietor . . . [The names of the proprietorship and the

2

proprietor] are two names for the same person.”); Asdourian v.

3

Araj, 38 Cal. 3d 276, 284-85 (1985), superseded by statute on

4

other grounds as stated in Pac. Custom Pools, Inc. v. Turner

5

Constr. Co., 79 Cal. App. 4th 1254, 1261 (2000) (in essence, a

6

sole proprietorship is the individual).

7

The Union has also presented sufficient evidence to pierce

8

the corporate veil of Zoom Electric, Inc. and hold Horak liable

9

for its debts as well.

“In considering whether to disregard the

United States District Court
For the Northern District of California

10

corporate form, we apply federal substantive law, although we may

11

look to state law for guidance.”

12

Cabinet & Mfg. Co., 877 F.2d 769, 772 (9th Cir. 1989) (citing

13

Laborers Clean-Up Contract Admin. Trust Fund v. Uriarte Clean-Up

14

Serv., 736 F.2d 516, 523 (9th Cir. 1984)).

15

whether or not to pierce the corporate veil and hold a shareholder

16

personally liable for corporate debts is based on three factors:

17

‘the amount of respect given to the separate identity of the

18

corporation by its shareholders, the degree of injustice visited

19

on the litigants by recognition of the corporate entity, and the

20

fraudulent intent of the incorporators.’”

21

Hull & Moreland Eng’g, 605 F.2d 1105, 1111 (9th Cir. 1979)).

22

party seeking to pierce the corporate veil “must prevail on the

23

first threshold factor and on one of the other two.”

24

v. Nor-Cal Plumbing, Inc., 48 F.3d 1465, 1475 (9th Cir. 1995).

25

addition to the formation of a corporation with fraudulent intent,

26

“post incorporation misuse of the corporate form . . . can satisfy

27

the fraudulent intent element.”

Board of Trustees v. Valley

“The determination of

Id. (quoting Seymour v.
A

UA Local 343
In

Valley Cabinet, 877 F.2d at 774.

28
22

1

The Union has presented substantial evidence, and Horak does

2

not dispute, that Horak has failed to respect Zoom Electric,

3

Inc.’s corporate form.

4

amount of business in the name of Zoom Electric, Inc. while its

5

corporate status was suspended, including assenting to the PLA,

6

contracting to perform the work at Roosevelt Middle School and

7

participating in the JAC dispute resolution process.

8

while suspension of corporate status under section 23301 of the

9

California Revenue and Tax Code does not automatically “deprive

First, Horak conducted a significant

Further,

United States District Court
For the Northern District of California

10

the corporation’s shareholders of the normal protection of limited

11

liability,” a “corporation’s failure to pay its franchise tax,”

12

which is the reason for suspension, is one piece of evidence “that

13

the shareholders do not view the corporation as having a separate

14

existence and that the corporation should possibly be regarded as

15

the alter ego of its shareholders.”

16

Beauty Supply Stores, Inc., 561 F.2d 774, 776-777 (9th Cir. 1977).

17

Finally, instead of obtaining a contractor license for Zoom

18

Electric, Inc., as required by California law prior to Zoom

19

Electric, Inc. acting as a contractor, see Cal. Bus. & Prof. Code

20

§§ 7025, 7028, Horak used his own contractor license number as

21

that of Zoom Electric, Inc., which is prohibited by law, Cal. Bus.

22

& Prof. Code § 7027.3.

23

Ins. Co., 154 Cal. App. 4th 71, 76-80 (2007) (a corporation may

24

not claim “substantial compliance” with the licensing requirement

25

if it has never been licensed within the state of California, even

26

if its managing officer and sole owner was duly licensed

27

throughout the relevant time period).

United States v. Standard

See also Opp v. St. Paul Fire & Marine

28
23

1

As previously stated, in addition to showing that Horak

2

failed to respect Zoom Electric, Inc.’s corporate form, the Union

3

must also show either that recognition of the corporate form would

4

result in an injustice or that Horak formed the corporation with

5

fraudulent intent or engaged in post-incorporation misuse of the

6

corporate form.

7

requirements, the Union has satisfied its burden as to both.

8
9

Instead of proving just one of these additional

Horak does not raise any disputed material facts in response
to the evidence presented by the Union to support the fraudulent

United States District Court
For the Northern District of California

10

intent prong.

11

continually misrepresented the corporate status of Zoom Electric,

12

Inc. in a variety of settings, including in the letter of assent

13

to the PLA, in the contract with B-side, and to the JAC and other

14

participants in the arbitration process.

15

Horak may be held criminally liable for transacting business on

16

behalf of Zoom Electric, Inc. while its corporate status was

17

suspended.

18

criminal offense for “attempt[ing] or purport[ing] to exercise the

19

powers, rights, and privileges of a corporation that has been

20

suspended pursuant to Section 23301”).

21

Horak misrepresented and failed to correct mistakes about Zoom

22

Electric, Inc.’s corporate and license status during the JAC

23

process suggests that he did so in order not to be individually

24

named in the JAC award.

25

The Union has introduced evidence that Horak has

Under California law,

See Cal. Rev. & Tax Code § 19719(a) (creating a

Further, the fact that

“Courts have found [the injustice] prong satisfied when ‘a

26

corporation is so undercapitalized that it is unable to meet debts

27

that may reasonably be expected to arise in the normal course of

28

business.’”

Laborers Clean-Up Contract Admin. Trust Fund v.
24

1

Uriarte Clean-Up Service, Inc., 736 F.2d 516, 525 (9th Cir. 1984)

2

(citing Note, Piercing the Corporate Law Veil: The Alter Ego

3

Doctrine Under Federal Common Law, 95 Harv. L. Rev. 853, 855

4

(1982)).

5

franchise tax, resulting in suspension of its corporate status, is

6

evidence that it was undercapitalized.

7

that Zoom Electric, Inc. lacked the funds to make fringe benefits

8

contributions for workers whom it employed at least in March 2011.

9

Horak Depo. 79, 84.

The fact that Zoom Electric, Inc. failed to pay its

Horak has also admitted

Zoom Electric, Inc. willfully contributed to

United States District Court
For the Northern District of California

10

its own undercapitalization by undertaking work without a valid

11

contractor license: it may not bring a suit for payment on jobs

12

that it undertook while unlicensed and any person who has already

13

paid Zoom Electric, Inc. for such work may bring an action to

14

recover that compensation.

15

§ 7031(a),(b).

16

See Cal. Bus. & Prof. Code

Accordingly, the Court GRANTS the Union’s motions to confirm

17

and enforce the arbitration award against Horak and for summary

18

judgment in its favor on its second cause of action against Horak,

19

and DENIES Horak and Zoom Electric’s motion to dismiss that cause

20

of action.

21

IV.

22

The Union’s motion for leave to file a second amended
counter-complaint
The Union seeks leave to add B-Side, Inc. as a

23

Counter-Defendant in order to hold it liable as the general

24

contractor to subcontractor ZEI pursuant to California Labor Code

25

section 2750.5.

26

the trust funds, EISC, Uno and Campbell.

27

motion to join B-Side and does not oppose joinder of the

The Union also seeks to add as Counter-Plaintiffs

28
25

ZEI opposes the Union’s

1

additional Counter-Plaintiffs.

2

65.

3

Opp. to Mot. for Leave, Docket No.

ZEI argues that joinder of B-side should not be permitted,

4

because the Union has delayed in seeking leave, resulting in

5

prejudice against ZEI, because joinder of B-side is futile as a

6

matter of law, and because the Union acted in bad faith.

7

Federal Rule of Civil Procedure 15(a) provides that leave of

8

the court allowing a party to amend its pleading “shall be freely

9

given when justice so requires.”

Because “Rule 15 favors a

United States District Court
For the Northern District of California

10

liberal policy towards amendment, the nonmoving party bears the

11

burden of demonstrating why leave to amend should not be granted.”

12

Genentech, Inc. v. Abbott Laboratories, 127 F.R.D. 529, 530-531

13

(N.D. Cal. 1989) (citing Senza-Gel Corp. v. Seiffhart, 803 F.2d

14

661, 666 (Fed. Cir. 1986)).

15

factors when assessing the propriety of a motion for leave to

16

amend: undue delay, bad faith, futility of amendment, prejudice to

17

the opposing party and whether the party has previously amended

18

the pleadings.

19

1051, 1055 n.3 (9th Cir. 2009).

20

Courts generally consider five

Ahlmeyer v. Nev. Sys. of Higher Educ., 555 F.3d

Although these five factors are generally all considered,

21

“futility of amendment alone can justify the denial of a motion.”

22

Id. at 1055.

23

facts can be proved under the amendment to the pleadings that

24

would constitute a valid and sufficient claim or defense.”

25

v. Rykoff-Sexton, 845 F.2d 209, 214 (9th Cir. 1988); Bonin v.

26

Calderon, 59 F.3d 815, 845 (9th Cir. 1995).

27

“not alone enough to support denial.”

28

Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990).

“[A] proposed amendment is futile only if no set of

26

Miller

In contrast, delay is

Morongo Band of Mission

1

ZEI argues that the Union has unduly delayed in seeking to

2

add B-side, because it has known since before filing the lawsuit

3

that ZEI was unlicensed and was a subcontractor of B-side.

4

Union responds only that it could not “conclusively show that ZEI

5

had no contractor license of its own” until Horak was deposed on

6

November 18, 2011.

7

arguments, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007),

8

and Ashcroft v. Iqbal, 556 U.S. 662 (2009), do not require it to

9

be able “conclusively” to prove its case in order to satisfy the

Reply, at 7.

The

However, despite the Union’s

United States District Court
For the Northern District of California

10

pleading requirements.

11

was unlicensed before the commencement of the case and that it has

12

had evidence since at least July 11, 2011 from the Contractors

13

License Board, showing that ZEI was unlicensed.

14

1RJN, Docket No. 27, Exs. A-C.

15

the Union delayed for at least five to seven months in seeking

16

leave to amend.

17

The Union admits that it believed that ZEI

Reply, at 7.

See

Accordingly, the Court finds that

ZEI also argues that the Union is acting in bad faith by

18

seeking to add B-side to this case only after the Union’s

19

stop-notice case against B-side was dismissed in state court.

20

Union responds that it could institute a new and separate action

21

against B-side bringing the same claims as in the instant case.

22

ZEI presents no evidence or argument that the stop-notice case

23

would bar the Union from doing so or how that case, a very

24

different type of action, could have determined issues related to

25

B-side’s liability for the arbitration award under section 2750.5.

26

Accordingly, the Court finds that ZEI has not established that the

27

Union is acting in bad faith.

28
27

The

1

ZEI further argues that amendment would be futile, because

2

the LMRA pre-empts section 2750.5, on which the Union relies to

3

argue that B-side as general contractor is the employer of its

4

unlicensed subcontractor and those employed by its unlicensed

5

subcontractor.

6

213, 220 (2000) (“Labor Code section 2750.5 operates to

7

conclusively determine that a general contractor is the employer

8

of not only its unlicensed subcontractors but also those employed

9

by the unlicensed subcontractors.”) (collecting cases).

See Hunt Bldg. Corp. v. Bernick, 79 Cal. App. 4th

ZEI

United States District Court
For the Northern District of California

10

argues that the LMRA “completely preempts” state law claims

11

brought to enforce collective bargaining agreements, such that

12

“any claim purportedly based on that preempted state law is

13

considered, from its inception, a federal claim, and therefore

14

arises under federal law.”

15

Corp., 208 F.3d 1102, 1107 (9th Cir. 2000).

16

Union thus may not rely on the California Labor Code for liability

17

against B-side.

18

found that the LMRA preempts section 2750.5.

19

Balcorta v. Twentieth Century-Fox Film
ZEI reasons that the

ZEI does not cite any case in which a court has

The LMRA’s broad preemption is not without limits.

The

20

Supreme Court has stated that the LMRA “cannot be read broadly to

21

pre-empt nonnegotiable rights conferred on individual employees as

22

a matter of state law.”

23

(1994).

24

claims that require interpretation or construction of a labor

25

agreement and those that require a court simply to ‘look at’ the

26

agreement.”

27

at 123-26); see also Livadas, 512 U.S. at 124 (“when the meaning

28

of contract terms is not the subject of dispute, the bare fact

Livadas v. Bradshaw, 512 U.S. 107, 123

Further, “the Supreme Court has distinguished between

Balcorta, 208 F.3d at 1108 (citing Livadas, 512 U.S.

28

1

that a collective-bargaining agreement will be consulted in the

2

course of state-law litigation plainly does not require the claim

3

to be extinguished”).

4

The Union argues that section 2750.5 confers a non-negotiable

5

right intended to protect all workers from unlicensed contractors.

6

ZEI appears to counter that this right is limited only to

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“worker’s compensation coverage” for “those injured on a job,”

8

because it is located within the workers’ compensation statute.

9

Opp. to Mot. for Leave, at 7.

However, it is not located within

United States District Court
For the Northern District of California

10

Divisions 4 through 4.7 of the California Labor Code, which

11

address Workers’ Compensation, but instead is located within

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Division Three, which addresses Employment Relations.

13

state courts have explicitly recognized that section 2750.5 is not

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limited to workers’ compensation cases.

15

Industries, 139 Cal. App. 3d 794, 798 (1983) (“To uphold the

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superior court’s finding section 2750.5 applies only in workers’

17

compensation cases, we would have to assume the Legislature did

18

not realize the scope of the division in which it placed the new

19

section, an assumption we cannot make.”); Sanders Construction

20

Co., Inc. v. Cerda, 175 Cal. App. 4th 430, 436 (2009) (“Although

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we agree that one reason for section 2750.5 is to insure

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compensation for injured workers, we also recognize it is

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fundamental that workers be paid.

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distinction exists between being paid wages and receiving other

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benefits based on wages.

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reasons militate against allowing a general contractor to escape

27

liability for the obligations of an unlicensed subcontractor.”).

California

See Foss v. Anthony

We discern no meaningful

In both instances, the same policy

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1

Further, application of section 2750.5 in this case would not

2

require any interpretation of the PLA, because once ZEI’s

3

liability is established, as it has been, the PLA does not need to

4

be consulted to determine B-side’s liability as general contractor

5

under section 2750.5.

6

ZEI also suggests that B-side may not be held liable because

7

ZEI told B-side that it was licensed, and because B-side did not

8

have an opportunity to defend itself during the JAC proceeding, so

9

the JAC award cannot be enforced against it.

These are defenses

United States District Court
For the Northern District of California

10

that can be raised and argued by B-side itself.

11

not amount to prejudice to ZEI.

These matters do

12

The Court finds that ZEI has not demonstrated that the Union

13

has not stated a plausible claim to relief under which B-side may

14

be held liable for the award against ZEI under section 2750.5.

15

Finally, ZEI argues that it would be unduly prejudiced by

16

B-side’s joinder because it would increase litigation costs.

17

However, with this Order, the Court resolves all claims against

18

ZEI, and only the liability of B-side remains to be adjudicated.

19

Even if additional discovery were required from ZEI, it would be

20

very limited, and would only go to whether ZEI was the

21

sub-contractor of B-side for the relevant jobs and whether ZEI was

22

licensed during the relevant time period.

23

not demonstrated that amendment would prejudice it.

24

Consequently, ZEI has

Accordingly, the Court GRANTS the Union’s motion for leave to

25

file a second amended counter-complaint.

26

second amended counter-complaint forthwith and serve it as soon as

27

possible.

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The Union shall file the

1

CONCLUSION

2

For the reasons set forth above, the Court DENIES Horak and

3

Zoom Electric’s motion to dismiss (Docket No. 17), DENIES ZEI’s

4

motion to vacate the arbitration award (Docket No. 20), DENIES

5

Horak and ZEI’s motion to dismiss the Union’s first amended

6

counter-complaint (Docket No. 60), GRANTS the Union’s motion for

7

leave to file a second amended counter-complaint (Docket No. 62),

8

and GRANTS the Union’s motion to confirm the arbitration award and

9

for summary adjudication on its second cause of action (Docket No.

United States District Court
For the Northern District of California

10
11

69).
Within seven days of the date of this Order,

12

Counter-Plaintiffs shall file a verified calculation of the

13

damages that they request based on their second cause of action.

14

Specifically, Counter-Plaintiffs shall include a calculation of

15

the contributions ZEI failed to make for forty-eight hours of

16

labor in January 2011 and sixty-four hours in February, plus

17

liquidated damages equal to ten percent (10%) of delinquent

18

contributions and interest at the rate of twelve percent (12%)

19

simple interest per annum, and shall show how they calculated the

20

total requested damages.

21
22
23

The case management conference currently set for March 29,
2012 at 2:00 p.m. is CONTINUED to May 9, 2012 at 2:00 p.m.
IT IS SO ORDERED.

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Dated: 3/20/2012

CLAUDIA WILKEN
United States District Judge

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