Trustees of the Chicago Painters and Decorators Pension Fund et al v. NGM SERVICES, INC
Filing
27
MEMORANDUM Opinion and Order. The plaintiff Funds' "motion for judgment on the pleadings and for audit" 15 is denied. The court requests that counsel for the parties meet and confer pursuant to Rule 26(f). The court further requests that counsel file a joint Form 52 by 1/22/2015. This case is set for a report on status and entry of a scheduling order at 9:00 a.m. on 1/29/2015. The parties are strongly encouraged to discuss a global settlement encompassing the claims in this case , as well as non-party Gene Mondello's and defendant NGM's failures to respond to the outstanding citations to discover assets in Case No. 10 C 717. Signed by the Honorable James F. Holderman on 12/22/2014. Notice mailed by judge's staff (ntf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
TRUSTEES OF THE CHICAGO
PAINTERS AND DECORATORS
PENSION FUND; TRUSTEES OF THE
CHICAGO PAINTERS AND
DECORATORS WELFARE FUND;
TRUSTEES OF THE CHICAGO
PAINTERS AND DECORATORS
SAVINGS FUND; TRUSTEES OF THE
CHICAGO PAINTERS AND
DECORATORS SCHOLARSHIP FUND;
and TRUSTEES OF THE CHICAGO
PAINTERS AND DECORATORS JOINT
COOPERATION TRUST FUND,
Plaintiffs,
v.
NGM SERVINCES, INC.,
Defendant.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
No. 14 C 5701
MEMORANDUM OPINION AND ORDER
JAMES F. HOLDERMAN, District Judge:
On July 25, 2014, plaintiffs Trustees of the Chicago Painters and Decorators Pension
Fund and its related funds (collectively, the “Funds”) filed a complaint (“Complaint”) (Dkt. No.
1 (“Compl.”)) against defendant NGM Services, Inc. (“NGM”) pursuant to the Employee
Retirement Income Security Act of 1974 (“ERISA”). The Funds’ Complaint seeks an order
declaring NGM to be a successor or alter ego of the now bankrupt Geno’s Decorating, Inc.
(“Geno’s”), and an order requiring NGM to submit all necessary books and records to the Funds’
accountant for the purpose of determining whether or not NGM is in compliance with its
purported obligation to the Funds. 1
On August 4, 2014, the Funds moved for a default judgment and audit order (Dkt. No. 8)
based on NGM’s failure to respond to the Complaint. On September 1, 2014, NGM filed an
answer (Dkt. No. 10) denying every allegation in the Complaint, including allegations
concerning the Funds’ identity, the identity of past and current officers of NGM and Geno’s, and
the existence of material publicly available on NGM’s website. (Id.) On September 16, 2014, at
the court’s instruction, NGM filed an amended answer (“Amended Answer”) (Dkt. No. 13 (“Am.
Ans.”).) On September 23, 2014, the Funds moved for judgment on the pleadings and for an
audit pursuant to Federal Rule of Civil Procedure 12(c). (Dkt. No. 15.) For the reasons explained
below, the Funds’ motion (Dkt. No. 15) is denied.
FACTUAL BACKGROUND 2
Until its bankruptcy filing on March 30, 2010, Geno’s operated as a commercial,
residential, and industrial painting business. (Compl. & Am. Ans. ¶¶ 3, 14.) On August 1, 2009,
Geno’s renewed its collective bargaining and trust agreements with Painters District Council #14
(the “Union”), which required Geno’s to make contributions to the Funds on behalf of Geno’s
employees, as Geno’s had done throughout its 14 years as a signatory contractor with the Union.
(Compl. & Am. Ans. ¶¶ 1, 7, 9.) Despite the agreements, Geno’s failed to make the requisite
contributions between August 1, 2009 and November 30, 2009. (Compl. & Ans. ¶ 10.) On
February 3, 2010, the Funds filed a lawsuit against Geno’s and its president and owner, Gene
Mondello (“Mondello”), to recover $13,256.63 in delinquent contributions, liquidated damages,
1
NGM is and always has been a non-Union employer. Its purported obligations to the Funds
stem from Geno’s alleged ERISA liability.
2
Unless otherwise stated, all of the facts discussed below are undisputed by NGM’s Amended
Answer.
-2-
and audit costs. (Compl. ¶¶ 1-12.) See also Trustees of Chicago Painters and Decorators
Pension Fund v. Geno’s Decorating, Inc., No. 10 C 717 (N.D. Ill.) (Lindberg, J.) (“Geno’s I”).
On March 17, 2010, two days after Geno’s answer to the Funds’ complaint was due,
NGM registered for the first time as an Illinois corporation. 3 (Compl. Ex. A.) NGM, like Geno’s,
provides commercial, residential, and industrial painting services. (Compl. & Am. Ans. ¶ 19.)
Unlike Geno’s, NGM also provides handyman and snow removal services. (Am. Ans. ¶ 17.)
NGM’s business address is the same as Geno’s former business address. (Id. ¶ 19.) Mondello is
NGM’s president and owns and “undisclosed percentage” of NGM. (Id. ¶ 21.) NGM’s corporate
secretary is Mondello’s wife, Nancy Mondello. (Id. ¶ 22.) And Geno’s former phone number
now rings to NGM. (Id. ¶ 20.)
On March 30, 2010, thirteen days after NGM’s incorporation, Geno’s filed for Chapter 7
bankruptcy. (Id. ¶ 20.) One day later, on March 31, 2010, the district court granted the Funds’
request to dismiss all claims against Geno’s and entered a default judgment against Mondello in
the amount of $13,256.64. See Geno’s I, No. 10 C 717 (Dkt. No. 12). On May 5, 2010, the Funds
served Mondello with a citation to discover assets following the Geno’s I judgment. Geno’s I,
No. 10 717 (Dkt. Nos. 14, 15). Mondello never responded. Id.
On June 4, 2010, the trustee closed Geno’s bankruptcy case after reporting that he had
received no property or money from Geno’s and had determined, after a diligent inquiry, that
there was no property available for distribution to Geno’s creditors. (Compl. & Am. Ans. ¶ 23)
See also In re Geno’s Decorating, Inc., 10 BK 13858 (Bankr. N.D. Ill June 4, 2010) (Dkt. Nos.
7, 8.) The Funds “believe” that all of Geno’s supplies and equipment transferred to NGM before
3
NGM concedes that somebody registered the company as an Illinois corporation, but denies
that Mondello was that somebody. (Ans. ¶ 13.)
-3-
Geno’s filed for bankruptcy. (Compl. ¶ 23.) NGM does not deny the Funds’ allegation and
admits that “NGM may have purchased some assets from Geno’s.” (Am. Ans. ¶ 23.)
NGM continues to operate as a commercial, residential, and industrial painting service,
using Geno’s personnel, location, equipment, and phone number. (Compl. & Ans. ¶¶ 19-22.)
Unlike Geno’s, however, NGM is a non-union employer. (Id. ¶ 25.) On July 9, 2014, after more
than four years of inactivity, the Funds served NGM with a citation to discover assets in
connection with the default judgment entered against Mondello in Geno’s I. See Geno’s I, 10 C
717 (Dkt. Nos, 16, 17.) On July 25, 2014, following NGM’s failure to respond to the citation, the
Funds filed a new action—the action currently before the court—seeking a declaration that NGM
is a successor or alter ego of Geno’s, and thus liable for Geno’s outstanding ERISA obligations.
(Compl. ¶ A.)
NGM’s Amended Answer admitted a number of the facts alleged in the Funds’
Complaint, prompting the Funds to move for judgment on the pleadings pursuant to Rule 12(c).
LEGAL STANDARD
In ruling on a Rule 12(c) motion that seeks to dispose of the case on its substantive
merits, “the appropriate standard is that applicable to summary judgment, except that the court
may consider only the contents of the pleading.” Alexander v. City of Chicago, 994 F.2d 333,
336 (7th Cir. 1993). The court may also consider documents attached or referenced to the
pleadings, and the court may take judicial notice of matters of public record. United States v.
Wood, 925 F.2d 1580, 1582 (7th Cir. 1991). All well-pleaded allegations in the non-movant’s
pleadings must be taken as true, and all facts and reasonable inferences from those facts must be
construed in the light most favorable to the non-movant. Alexander, 994 F.2d at 336. Legal
-4-
characterizations of the facts by the non-movant, however, are not binding. Nat’l Fid. Life Ins.
Co. v. Karaganis, 811 F.2d 357, 358 (7th Cir. 1987).
ANALYSIS
Before evaluating the merits of the Funds’ motion, the court must address NGM’s
contention that the court lacks subject matter over the Funds’ claim and that the Funds lack
standing to sue. Neither argument is availing.
NGM first contends that the court does not have jurisdiction in light of the United States
Supreme Court’s decision Peacock v. Thomas, 516 U.S. 349 (1996). In Peacock, the Supreme
Court held that attempts to hold corporate officers vicariously liable for their firms’ pension
debts invoke state law, not federal law, and federal courts therefore lack jurisdiction over efforts
to pierce the corporate veil in pursuit of an ERISA judgment. Id. at 354. But the Funds here do
not seek to pierce the corporate veil between Geno’s and NGM because there never was any veil
between the two companies. Geno’s and NGM coexisted for only 13 days in 2010 and there is no
evidence before the court establishing that the two companies operated as one. Instead, the Funds
seek to hold NGM liable under theories of successor or alter ego liability, both of which are
claims for direct—not vicarious—liability. See, e.g., Bd. of Trs. v. Elite Erectors, 212 F.3d 1031,
1038 (7th Cir 2000) (“[A] contention that A is B’s “alter ego” asserts that A and B are the same
entity; liability then is not vicarious but direct.”) The Funds claim against NGM is therefore one
for direct liability under ERISA—a distinctly federal law—over which the court has jurisdiction
pursuant to 28 U.S.C. § 1331. See Elite Erectors, 212 F.3d at 1038 (“All liability under ERISA is
federal.”).
NGM next argues that the Funds lack standing to sue in light of Geno’s discharge in its
bankruptcy case. NGM’s argument, which is really about preclusion—not standing—is similarly
-5-
opposite to well-established Seventh Circuit law. In Chicago Truck Drivers v. Tasemkin, Inc., 59
F.3d 48 (7th Cir. 1995), the Seventh Circuit addressed the viability of an ERISA fund’s claim
against a successor corporation where the predecessor had filed for bankruptcy. There, as here,
the defendant argued the bankruptcy proceedings foreclosed successor liability because creditors
should not be given a second opportunity for recovery after coming up short in the bankruptcy
proceeding. Id. at 50. The Seventh Circuit rejected that argument and concluded that because the
very purpose of successor liability is to provide a second chance for recovery, an intervening
bankruptcy proceeding should not have a per se preclusive effect on an ERISA fund’s attempts
to hold the successor liable. Id.
The remainder of the Seventh Circuit’s holding in Tasemkin, however, illustrates why the
Funds here cannot meet the demanding standard of review applicable to Rule 12(c) motions.
Although the Seventh Circuit refused to grant bankruptcy proceedings the per se preclusive
effect NGM seeks, a creditor’s ability (or inability) to recover against a predecessor remains one
of the factors the court must consider in determining successor liability. See Tasemkin, 59 F.3d at
50. Specifically, the court cautioned against imposing liability on a successor when a predecessor
could not have provided any relief when the underlying claims arose. Id. (citing Musikiwamba v.
ESSI, Inc., 760 F.2d 740, 751 (7th Cir. 1985)). The court must therefore consider the availability
of relief from Geno’s along with the other facts supporting successor or alter ego liability.
Here, the only information concerning the availability of relief from Geno’s comes from
the docket of Geno’s bankruptcy case, and that information does not support the relief sought by
the Funds. Geno’s bankruptcy trustee found no assets available to distribute to Geno’s creditors,
a group that would have included the Funds had they participated in the bankruptcy proceeding.
The Funds chose not to participate, and perhaps that is why the Complaint is devoid of
-6-
allegations concerning Geno’s financial condition during the relevant time period. 4 As it stands,
there no information before the court supporting the Funds’ ability to recover from Geno’s in
March 2010. The dearth of information is presumably why the Funds also ask this court to order
an audit of NGM, but that approach puts the cart before the horse. The Funds cannot rely on the
result of a future audit to support their argument that Geno’s could have paid its ERISA
obligations before transferring “some” of its assets to NGM. In ruling on the Funds’ Rule 12(c)
motion, the court must draw all inferences in favor of NGM, including the inference that the
Funds could not have recovered against NGM’s predecessor. The audit the Funds seek is the
very purpose of discovery. It may be that Geno’s transferred all of its assets to NGM to
circumvent ERISA and to resurrect an identical business. But that is a question to be answered
during summary judgment or trial, not through a judgment on the pleadings where the facts are
in dispute.
The remaining factors the court must consider in determining successor or alter ego
liability likewise require discovery. The factors supporting successor liability include whether
“[a] there has been a substantial continuity of the same business operations; [b] the new
employer uses the same plant; [c] the same or substantially the same work force is employed; [d]
the same jobs exist under the same working conditions; [e] the same supervisors are employed;
[f] the same machinery, equipment, and methods of production are used; and (g) the same
product is manufactured or the same service [is] offered . . . .” Int'l Union of Operating
Engineers, Local 150, AFL-CIO v. Centor Contractors, Inc., 831 F.2d 1309, 1312 (7th Cir.
1987) (internal citations and quotations omitted). Similarly, in determining whether a company is
4
As discussed above, the Funds chose to take a judgment against Mondello personally, as
authorized by ERISA, and dismiss the claims against Geno’s.
-7-
the alter ego of its predecessor, the court considers “whether they have substantially identical
management, business purpose, operation, equipment, customers, supervision, and ownership.”
Barker v. A.D. Conner Inc., 807 F. Supp. 2d 707, 721 (N.D. Ill. 2011) (Dow, J.).
Although NGM admits that it performs services similar to those performed by Geno’s,
has the same President, and operates at the same location, the court lacks information concerning
the two companies’ customers, workforce, assets, and ownership. The question of ownership, in
particular, illustrates the need for discovery in this case. NGM’s Amended Answer states that
Mondello is “an owner of [an] undisclosed percentage of ownership” of NGM. (Am. Ans. ¶ 21.)
NGM’s response is undoubtedly frustrating for the Funds; Mondello’s stake is “undisclosed”
because NGM has deliberately refused to disclose it. On a Rule 12(c) motion, however, the court
must presume that Mondello and his wife do not own a large enough share of NGM to support
holding NGM liable for Geno’s debts. Facts learned in discovery, by contrast, would supersede
the court’s required presumption and will inform counsel as to the true nature of NGM’s
formation, ownership, and operations. 5 In Tameskin, the case the Funds urge the court to follow,
the Seventh Circuit held that because of “the myriad factual circumstances and legal contexts in
which [successor liability] can arise . . . emphasis on the facts of each case as it arises is
especially appropriate.” Tameskin, 59 F.3d at 48. That holding applies with equal force here and
illustrates why judgment on the pleadings, for the plaintiff, is rarely appropriate given the factual
inquiries necessary to determine successor or alter ego liability. 6 The Funds here have not
5
And perhaps the origins of NGM’s name. The court observes that one possibility is that
“NGM” is a combination of Nancy and Gene Mondello’s first initials along with their joint
last initial.
6
The Funds have not provided, and the court through its own research has not discovered, any
case in this circuit determining the question of successor or alter ego liability in favor of a
plaintiff on a Rule 12(c) motion.
-8-
presented sufficient undisputed facts for the court to make a determination on the question of
successor or alter ego liability. The Funds’ motion for judgment on the pleadings pursuant to
Rule 12(c) must therefore be denied.
CONCLUSION
For the reasons explained above, the plaintiff Funds’ “motion for judgment on the
pleadings and for audit” [15] is denied. The court requests that counsel for the parties meet and
confer pursuant to Rule 26(f). The court further requests that counsel file a joint Form 52 by
1/22/2015. This case is set for a report on status and entry of a scheduling order at 9:00 a.m. on
1/29/2015. The parties are strongly encouraged to discuss a global settlement encompassing the
claims in this case, as well as non-party Gene Mondello’s and defendant NGM’s failures to
respond to the outstanding citations to discover assets in Case No. 10 C 717.
ENTER:
_______________________________
JAMES F. HOLDERMAN
District Judge, United States District Court
Date: December 22, 2014
-9-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?