Midwest Operating Engineers Welfare Fund et al v. Sulzberger Excavating Company
MEMORANDUM Opinion and Order. Signed by the Honorable Manish S. Shah on 9/14/2017: Plaintiffs' motion for summary judgment, 43 , is denied. Defendants' motions for summary judgment, 34 , 37 , are granted. [For further detail see attached order.] A status hearing is set for 9/28/17 at 9:30 a.m. Notices mailed. (psm, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
MIDWEST OPERATING ENGINEERS
FRINGE BENEFIT FUNDS, et al.,
No. 16 CV 4209
Judge Manish S. Shah
SULZBERGER EXCAVATING CO., et al.,
MEMORANDUM OPINION AND ORDER
Midwest Operating Engineers Fringe Benefit Funds and the Construction
Industry Research and Service Trust Fund sue defendants Sulzberger Excavating,
Inc., and SulzCo, LLC, under the Employee Retirement Income Security Act, 29
U.S.C. §§ 1132, 1145, for delinquent contributions.1 The International Union of
Operating Engineers, Local 150, AFL-CIO sues defendants for union dues under the
Labor Management Relations Act, 29 U.S.C. § 185. Plaintiffs and defendants crossmove for summary judgment solely on the issue of whether SulzCo is liable for SEI’s
obligations to the union and the funds. For the following reasons, plaintiffs’ motion
for summary judgment is denied and defendants’ motions for summary judgment
The amended complaint and case caption refer to Sulzberger Excavating Company, but
the parties’ briefs reference Sulzberger Excavating, Inc. or “SEI.” Plaintiffs are no longer
pursuing an action regarding a 2014 audit finding of SEI.  at 13.
Summary judgment is appropriate if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law. Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir.
2014); Fed. R. Civ. P. 56(a). A genuine dispute as to any material fact exists if “the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking
summary judgment has the burden of establishing that there is no genuine dispute
as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
“Cross-motions must be evaluated together, and the court may not grant summary
judgment for either side unless the admissible evidence as a whole—from both
motions—establishes that no material facts are in dispute.” Bloodworth v. Village of
Greendale, 475 Fed. App’x 92, 95 (7th Cir. 2012).
Sulzberger Excavating, Inc. was an excavating company that conducted
business in the area around Muscatine, Iowa.  ¶ 1. SEI’s president, Jerry
Sulzberger, founded the company in 1960. Id. ¶ 4;  ¶ 3. Jerry was the majority
Bracketed numbers refer to entries on the district court docket. Referenced page numbers
are taken from the CM/ECF header placed at the top of filings, except in the case of
citations to depositions, which use the deposition transcript’s original page number. The
facts are largely taken from plaintiffs’ responses to SEI’s and SulzCo’s LR 56.1 statements
of fact,  and  respectively, and from SEI’s response , and SulzCo’s response ,
to plaintiffs’ LR 56.1 statement of fact, where the asserted fact and accompanying response
are set forth in the same document. SulzCo replied to plaintiffs’ responses to SulzCo’s LR
56.1 statement of fact,  at 1–5, but such replies are not permitted and are therefore
disregarded. See LR 56.1. Any facts that were not properly controverted by reference to
admissible evidence are deemed admitted. Id.
shareholder of SEI, owning 55%, with the remaining shares divided among his five
sons.  ¶ 7;  ¶ 8. Throughout the years, Jerry employed various family
members at SEI, including his son Barry Sulzberger, who was SEI’s Vice President.
 ¶¶ 8, 10. Jerry and Barry are members of the International Union of Operating
Engineers, Local 150, AFL-CIO (Local 150), and SEI was a signatory to contracts
with the union.  ¶ 8;  ¶¶ 6–7. Jerry also employed his grandson (Barry’s
son), Zack Sulzberger, as an estimator and Jerry’s grand-nephew, Tyler Sulzberger,
in accounting.  ¶¶ 13–14;  ¶¶ 10–11. The parties dispute the extent of
Tyler’s role,  ¶ 14;  ¶ 10, although there is no dispute that his CFO title was
self-appointed. [45-2] at 8:22–9:4.
By 2014, Jerry had made it clear that he was retiring.  ¶¶ 12, 22; 
¶ 14;  ¶ 17. The following year, SEI stopped bidding on jobs and began slowly
selling its equipment (there is some dispute as to whether SEI began selling large
pieces of equipment even earlier,  ¶ 14), beginning a drawn-out liquidation
process to minimize the tax consequences of winding up the business.  ¶¶ 12, 42;
 ¶ 14. In May 2016, Jerry informed Local 150 that SEI was shutting down. 
¶ 9. By September 2016, SEI had sold most of its machines and had entered into a
contract to sell the office and yard. Id. ¶ 14. Jerry was the only employee left, and
he expected SEI to be completely liquidated by the end of 2017. Id.
When Jerry announced his retirement, Zack and Tyler began discussing
carrying on in the excavating industry with their own, new company, instead of
purchasing SEI.  ¶ 19. Zack and Tyler intended to start a non-union company.
 ¶ 15. The parties dispute whether the men were concerned about their
employment if SEI closed.  ¶ 16;  ¶¶ 9–10. The parties agree that Tyler had
observed some “bad blood” and “family drama” at SEI, that he viewed starting a
new company as a “clean slate,” free from SEI’s tarnished reputation, and that Zack
thought the business was a “mess.”  ¶ 11. Plaintiffs dispute that these were the
sole (or main) reasons for starting a new company.  ¶¶ 13–14;  ¶¶ 10–12.
The parties also dispute whether Barry was interested in buying SEI and whether
Zack and Tyler thought that Jerry would refuse to let anyone else run SEI. 
¶ 15;  ¶¶ 13–14;  ¶ 13. According to Jerry, Zack and Tyler did not want to
buy SEI because they did not want to assume SEI’s union contract, which made the
company “basically like a dinosaur” and made it difficult to compete with local,
largely non-union competitors.  ¶ 15;  ¶ 14; [45-2] at 87:22–88:1. Also,
Tyler’s father, Tim Sulzberger (Jerry’s nephew), would not assist with financing and
start-up unless the new company was non-union. [45-3] at 5:8–13.
In July 2014, Zack and Tyler formed SulzCo, LLC.  ¶ 20;  ¶¶ 5, 17;
 ¶ 8. Zack is SulzCo’s president, estimator, and project manager, and Tyler is
Vice President and CFO.  ¶ 5. At the time they registered SulzCo, Zack and
Tyler were still on full-time payroll at SEI. Id. ¶ 13. Zack was employed by SEI
until early May 2015.  ¶ 36;  ¶¶ 10, 28. Tyler continued at SEI until late
June 2015.  ¶¶ 10, 28. From June 2015 to June 2016, he assisted SEI with
payroll and accounting matters as a consultant, billing SEI around $16,000 for his
services and working on SEI computers (though he occasionally logged in to SEI’s
computers remotely).  ¶ 37;  ¶¶ 10, 35;  ¶ 20. According to Jerry, Tyler
was helping SEI until Jerry could find a replacement because he was “caught pretty
flat footed.”  ¶ 20. At some point in 2015, Zack and Tyler told Jerry that SulzCo
had been formed and Jerry reportedly was “fine with it.”  ¶ 27.
In early 2015, Zack and Tyler drafted a business plan, which was based off of
SEI’s work and research tools and which listed many of the same competitors. Id.
¶¶ 23–24. The business plan included arrangements to buy construction equipment
from SEI because SEI was going out of business. Id. ¶ 25. Zack and Tyler also
considered storing SulzCo’s equipment at Barry’s (Zack’s father’s) yard. Id. The
business plan was drafted on either Tyler’s personal computer or computers
purchased by Zack and Tyler for SulzCo.  ¶ 19. In February 2015, Tyler, Zack,
and Tyler’s father, Tim Sulzberger (Jerry’s nephew), presented the business plan to
a bank. Id. ¶ 18. To obtain loans for starting up SulzCo and purchasing equipment,
Tyler and Zack put up their personal assets as collateral.  ¶¶ 18, 37;  ¶ 20.
Tim also took out a personal loan to purchase SulzCo’s first pieces of equipment,
and he personally guaranteed loans for purchasing equipment and obtaining an
operating line of credit for SulzCo.  ¶¶ 29–30;  ¶ 18;  ¶¶ 21–22.
Eventually, in 2016, SulzCo adopted an operating agreement giving Tim one-third
ownership in SulzCo in exchange for financing; Zack and Tyler each own one-third
as well.  ¶ 32;  ¶ 1. Tyler, Zack, and Tim do not own any interest in SEI. 
¶ 5. Jerry and Barry do not own any interest in SulzCo. Id. SEI has never applied
for, guaranteed, or co-signed any application for a loan, or line of credit, for SulzCo.
 ¶ 49. In late 2014 or early 2015, Jerry offered to assist Zack and Tyler with
securing bonding for SulzCo projects, but nothing ever came of it, and the parties
dispute whether Jerry’s offer was serious.  ¶ 22.
By the spring of 2015, SEI had stopped bidding for work and focused on
finishing lingering projects. Id. ¶ 14. Unbeknownst to Jerry, SulzCo began bidding
on work in April 2015. Id. ¶¶ 27–28; [39-1] at 45:14–22. SulzCo performed work in
SEI’s and Local 150’s geographic jurisdiction, near Muscatine, Iowa (where both
SEI and SulzCo are based).  ¶¶ 3–5. Zack worked as an estimator, and Tyler
helped with numbers, bid bonds when necessary, insurance, and packing bids. Id.
¶ 28. Barry also helped Zack with estimates. Id. SulzCo bid on projects similar to
those SEI performed, for similar or the same customers. Id. ¶¶ 28, 33. Plaintiffs and
defendants dispute whether SulzCo performs the exact same work as SEI. Id. ¶ 5.
Defendants contend that they only have three pieces of heavy equipment (fewer
than SEI) and have started out only doing small repair jobs, though they plan to
expand to do work similar to SEI. Id. SEI has never assigned an excavating job to
SulzCo.  ¶ 45. To generate business for SulzCo, Zack and Tyler advertised their
company by making calls to engineers, businesses, and cities and by taking out a
phonebook ad.  ¶ 34.
In May 2015, Zack and Tyler purchased insurance for the company and
SulzCo hired some former SEI employees, including Chad Estabrook (a Local 150
member), and two others. Id. ¶¶ 20–21, 38;  ¶¶ 8–9. None of these new
employees were directly hired from SEI. For example, Estabrook left SEI in
December 2014 and did not start at SulzCo until May 2015.  ¶¶ 37–38. In
October 2015, SulzCo hired Zack’s brother, Jeremy, who had also previously worked
for SEI.  ¶ 40. Zack and Tyler were interested in hiring at least three other SEI
employees, but because they were Local 150 union members, Zack and Tyler did not
think they would be interested in working for non-union SulzCo. Id. ¶ 39. Tyler
drafted at-will, non-union employment agreements for SulzCo’s employees, and he
established SulzCo’s pay scales based on non-union pay rates in the area
construction industry. Id. ¶¶ 41–42. The Local 150 operator scale at SEI was $29.40
per hour, but SulzCo offered operator rates from $18.00 to $22.00 per hour based on
years of experience. Id. ¶ 42. SulzCo, operating non-union, did not pay the union
pension or retiree medical savings plans benefits for its employees, including
Estabrook (a Local 150 member). Id. ¶ 44. In September 2015, SulzCo paid
Estabrook a $4,069.79 bonus—another employee was given a bonus as well. Id.; 
¶ 22. Plaintiffs assert that this bonus effectively compensated Estabrook for unpaid
union pension and retiree medical savings plan contributions, minus SulzCo’s
health insurance contributions for Estabrook.  ¶ 44. Defendants assert that this
was an incentive bonus for project completion. Id.
SulzCo’s first project also began in May 2015 and was a small repair job for a
former customer of SEI. Id. ¶ 45;  ¶ 24. Tyler, although still a full-time SEI
employee, went to the SulzCo jobsite to photograph the start-up.  ¶ 46. (At that
time, Zack was no longer employed by SEI. Id. ¶ 10.) That same month, a local
newspaper published an online news story, interviewing Zack and Tyler about
SulzCo. Id. ¶ 36. In the article, Zack and Tyler stated that they were “carry[ing] on”
the business and the family name. Id.; [45-6] at 10–11. SulzCo did not request any
clarifications to the article.  ¶ 36. The article also stated that Zack and Tyler
decided to move forward with a new company and a new name because they had no
ownership stake in SEI, and Jerry’s children were themselves approaching
retirement age and uninterested in continuing SEI. [45-6] at 11.
That same month, SulzCo also began purchasing equipment from SEI, using
money from a loan obtained by Tim.  ¶ 49. From May to October 2015, SulzCo
owned just three pieces of heavy equipment, all purchased from SEI.  ¶ 34.
Tyler prepared for SEI, and executed on SulzCo’s behalf, a bill of sale for SulzCo’s
purchase of a backhoe and excavator from SEI.  ¶ 49. SulzCo purchased the
backhoe for $20,000 and the excavator for $25,000, although SEI had insured this
equipment at actual cash values of $22,000 and $45,000, respectively. Id. ¶ 50. In
October 2015, SulzCo purchased a front end loader from SEI for $27,780. [45-7] at
36. SulzCo had previously rented the machine from SEI for $14,220.  ¶ 52. SEI
had insured it for $50,000. Id.
Over time, SulzCo rented and purchased more equipment from SEI and from
various auctions.  ¶ 38;  ¶ 70;  ¶ 25. Jerry used auction sales prices to
estimate fair market value of the equipment SEI sold to SulzCo.  ¶ 53;  24.
SEI also sold equipment to other companies and at auctions, but Jerry preferred to
sell SEI’s equipment to other companies because he had been “burned” at auctions
in the past.  ¶ 28;  ¶ 25. Several pieces of equipment purchased from SEI
retained the SEI logo.  ¶ 67.
SulzCo also occasionally leased employees and equipment from SEI. Id. ¶ 56.
Sometimes Zack would make arrangements with Jerry to lease SEI employees for
SulzCo jobs, and sometimes Jerry would call SulzCo to see if they had work for
Barry and for Jerry’s two other sons (also Local 150 members). Id.;  ¶ 28.
Between August 2015 and June 2016, SulzCo leased multiple union-member
employees—including Barry—from SEI to work on different projects.  ¶¶ 57–59.
As long as SEI paid the required contributions for its Local 150 employees, it was
not a violation of the Master Agreements for SEI to subcontract its union-member
employees to another excavating company.  ¶ 29. The parties dispute whether
Barry ever acted as a foreman or supervisor on these jobs.  ¶ 57. SulzCo also
leased some of the equipment it purchased from SEI back to SEI. Id. ¶ 62. SEI has
leased equipment to only two companies other than SulzCo, and one of those
companies was a union-signatory company owned by another of Jerry’s nephews. Id.
¶ 63. SulzCo has also leased heavy equipment from two equipment rental shops, a
company owned by Zack’s brother (Jeremy), and a general contracting company
owned by Jerry’s nephew, for which SulzCo now often works as a subcontractor. 
Starting in 2015, Barry allowed SulzCo to store heavy equipment and
supplies at his farm.  ¶¶ 68, 70. In November 2015, Barry also began providing
SulzCo with, and billing for, consulting services. Id. ¶ 71. Barry retired from SEI in
December 2015. Id. ¶ 8. Afterward, he continued to provide consulting and other
assistance to SulzCo, only billing for some of his work. Id. ¶¶ 71–72;  ¶ 19.
SulzCo performs the same scope of work as SEI, also in Local 150’s
geographic jurisdiction, within approximately 60 miles of Muscatine, Iowa.  ¶ 5.
Although both are located in Muscatine, Iowa, SEI and SulzCo have different office
addresses. Id. ¶¶ 3–4;  ¶¶ 2–3. SEI and SulzCo have never shared or jointly
operated a bank account.  ¶ 32.3 SEI and SulzCo have submitted competing bids
only twice, once in 2015 (for a job that neither received), and once in 2016 (at a time
when Jerry was the sole remaining SEI employee). Id. ¶ 31. Out of the nine total
employees that SulzCo has hired, three were former employees of SEI.  ¶ 21.
SulzCo did not ultimately purchase all the heavy equipment it originally listed in
its business plan, nor did it bid on all the jobs in the plan. Id. ¶ 27.
In 2015, Local 150 began inquiring about the relationship between SEI and
SulzCo, eventually sending SEI a questionnaire about the companies’ relationship.
 ¶¶ 73–75. Jerry, responding on behalf of SEI, stated that the formation of
SulzCo “forced” it to liquidate, even though Jerry had been discussing liquidation
since 2014. Id. ¶ 75; see [45-13] at 12. He failed to answer many of the questions,
identified himself as the primary bookkeeper of SEI, did not acknowledge that SEI
had rented or used equipment after selling it to SulzCo or that SEI had leased
employees to SulzCo, and did not answer whether Tyler had been an officer of SEI.
Plaintiffs failed to respond this fact, so it is admitted. LR 56.1.
 ¶ 75. Jerry also indicated in his answers that neither SEI, nor its officers or
shareholders, had contributed assets or funds to SulzCo. Id. ¶ 75.
The only issue raised by the parties’ cross-motions for summary judgment is
whether SEI’s obligations under the applicable collective bargaining and trust-fund
agreements can be imposed on SulzCo. As a threshold matter, plaintiffs and SEI
apply federal common law, while SulzCo’s motion applies Iowa law (as SEI and
SulzCo are both Iowa corporations). SulzCo, however, applies federal common law
in its reply brief and in response to plaintiffs’ motion for summary judgment.
Federal common law on successor liability applies to this case because the state law
of successor liability, which cuts off the obligation to pay a predecessor’s promised
contributions, significantly conflicts with the federal interest in minimizing
contribution losses and burdening other plan participants. Moriarty v. Svec, 164
F.3d 323, 328–29 (7th Cir. 1998) (citing Atherton v. FDIC, 519 U.S. 213, 218 (1997)).
In the labor-law-successorship or joint-liability context, courts must “balance
the well-articulated federal interest in ensuring that employers maintain properly
funded pension plans and the social interest in facilitating the market in corporate
and other productive assets.” Upholsterers’ Int’l Union Pension Fund v. Artistic
Furniture of Pontiac, 920 F.2d 1323, 1325 (7th Cir. 1990). The parties generally
agree that, under federal common law, labor liability may be imposed on another
company, where: (1) two nominally separate businesses operate as a single
employer; (2) a company is the alleged “alter ego” of a collective-bargainingagreement signatory seeking to avoid its obligations; or (3) a successor company
expressly or implicitly assumed the collective bargaining obligations of its
predecessor.4 The parties seek summary judgment in their respective favor on these
theories of liability.
Under the single-employer doctrine, when two entities are sufficiently
integrated, they will be treated as a single entity for labor-liability purposes. Svec,
164 F.3d at 332 (citing Radio and Television Broadcast Technicians Local Union
1264 v. Broadcast Service, 380 U.S. 255, 256 (1965)). To determine whether two
nominally separate business entities operate as a single employer, a fact-finder
examines four factors: (1) interrelation of operations, (2) common management, (3)
centralized control of labor relations, and (4) common ownership. Lippert Tile Co. v.
Int’l Union of Bricklayers & Allied Craftsmen, Dist. Council of Wisconsin & Its Local
5, 724 F.3d 939, 946 (7th Cir. 2013) (citing S. Prairie Constr. Co. v. Local No. 627,
Int’l Union of Operating Eng’rs, 425 U.S. 800, 803 (1976)). Although centralized
control of labor relations is a significant factor, Gen. Drivers, Warehousemen &
Helpers, Local Union No. 89 v. Pub. Serv. Co. of Indiana, 705 F.2d 238, 242 (7th Cir.
1983), no single factor is determinative, and a decisionmaker must weigh the
totality of the circumstances. Lippert Tile Co., 724 F.3d at 946–47. “Ultimately,
single employer status . . . is characterized by the absence of an arm’s length
relationship found among unintegrated companies.” Id. at 947. Plaintiffs have not
The parties also agree that liability can be imposed in a fourth instance—under the
“successorship” doctrine.  at 6;  at 4. As discussed below, however, plaintiffs failed to
develop any argument based on this theory and have therefore waived their ability to do so.
shown a genuine dispute of material fact that demonstrates that they could
establish single-employer liability, and this failure of proof entitles defendants to
judgment as a matter of law. Three of the four factors are missing: common
ownership, common management, and centralized control of labor relations.
Plaintiffs acknowledge that SEI and SulzCo do not have common ownership.
Jerry and his sons own SEI. Tyler, Zack, and Tim own SulzCo. Plaintiffs argue that
this factor can be met, however, by showing SEI’s contributions to SulzCo’s
formation: keeping Zack and Tyler on payroll, selling equipment for less than its
insured value, subcontracting employees to SulzCo, and by Barry allowing SulzCo
to store its equipment on his land. But plaintiffs cite no authority substituting mere
business assistance, or favorable terms, for common ownership. And the lack of
common ownership “stands strongly against the imposition of single employer
liability.” Trustees of the Pension, Welfare & Vacation Fringe Ben. Funds of IBEW
Local 701 v. Favia Elec. Co., 995 F.2d 785, 788 (7th Cir. 1993).
The common-management factor looks at an entity’s “actual or active control,
as distinguished from potential control, over the other’s day-to-day operations.”
Lippert Tile Co., 724 F.3d at 947 (quoting Cimato Bros., 352 NLRB 797, 799 (2008)).
Having a formal job title does not necessarily indicate actual management
responsibility. Cremation Soc’y of Illinois, Inc. v. Int’l Bhd. of Teamsters Local 727,
No. 16-2322, 2017 WL 3699804, at *4 (7th Cir. Aug. 28, 2017). Plaintiffs argue that
Jerry, Barry, and Tyler exercised common management over both SEI and SulzCo.
Plaintiffs provide no evidentiary support, however, for Jerry’s alleged management
of SulzCo—they merely argue that he gave his blessing for SulzCo’s formation and
assisted with its transition. But it is undisputed that Jerry did not even know when
SulzCo began bidding on projects. Plaintiffs also argue that Barry worked as a
project manager for both SEI and SulzCo before he retired, and that he continued to
assist SulzCo after his retirement. But managing work sites at two companies is not
the same as exercising managerial control over a company’s day-to-day operations.
See Trustees of IBEW Local 701, 995 F.2d at 788 (concluding that companies had
nominally separate management where husband was sole proprietor of Company A
and wife was active president of Company B; the fact that husband managed the
work sites for both businesses “was not sufficient to destroy the separateness of
Plaintiffs also contend that Tyler acted as SEI’s CFO, and he is undisputedly
SulzCo’s CFO. Tyler’s self-appointed CFO title at SEI is irrelevant—only actual
managerial authority matters. Although the extent of his accounting and financial
management is disputed by the parties, it is not disputed that he worked on
accounting, payroll, and billing while at SEI, and that he continued to help SEI on
these matters after he transitioned to SulzCo, billing SEI for his consulting services
and working on SEI’s computers, sometimes accessing them remotely. Through
Tyler, there is some overlap in the companies’ financial and accounting
management. But without more to suggest that SEI had managerial control over
SulzCo’s day-to-day operations, such as its bidding or administration, or that
SulzCo had control over SEI’s liquidation, this is not enough to destroy the
separateness of the companies’ management. See Cremation Soc’y of Illinois, 2017
WL 3699804, at *4 (determining that the common-management factor weighed in
favor of a single-employer finding where employees in both companies reported to
the same managers and executives, were part of the same organization chart, and
where the companies shared an executive board).
Nor do SulzCo and SEI share centralized control of labor relations. This
factor considers “who is responsible for hiring, firing and evaluating employees.” Id.
Plaintiffs argue that SEI and SulzCo maintained centralized control of labor
relations between Jerry, Barry, and Zack. It is undisputed, as plaintiffs maintain,
that Jerry and Zack coordinated SulzCo’s subcontracting of SEI’s employees on a
number of occasions (over forty times during the course of eight SulzCo projects).
Plaintiffs also argue that Barry supervised employees at SulzCo while he was
managing SEI-subcontracted jobs, and later helped out around SulzCo after his
retirement. Even so, these facts do not show that SEI and SulzCo shared
responsibilities for hiring, firing, and evaluating each other’s employees. Plaintiffs
have not identified evidence in the record to suggest that Jerry or Barry could hire
or fire SulzCo employees, or that they could decide when SulzCo would subcontract
SEI employees (other than calling to see if SulzCo had work for SEI employees). See
id. (holding centralized control of labor relations existed where one person hired,
fired, and evaluated employees of both companies, even though only one company
paid her salary). Moreover, there is nothing in the record to show that Zack had any
control over SEI’s employees, other than choosing to hire them as subcontractors.
The remaining factor—interrelation of operations—cuts both ways. When
analyzing the interrelation of operations, “day-to-day operational matters” are most
relevant. Id. Interrelated operations include companies that operate out of the same
building, use the same employees, have the same organizational chart or
management, operate in the same geographic market and industry with the same or
similar customers, share computers and phone numbers, use the same bank
accounts, or use the same payroll and billing entity. See id.; Lippert Tile Co., 724
F.3d at 947; R.R. Maint. Laborers’ Local 1274 Pension, Welfare & Educ. Funds v.
Kelly R.R. Contractors, 591 F. Supp. 889, 896 (N.D. Ill. 1984). Indicators of noninterrelated operations include maintenance of separate records, licenses, bank
accounts, equipment, and phone numbers. See Trustees of IBEW Local 701, 995 F.2d
at 788; RKN Concrete Constr., Inc. v. Laborers’ Pension Fund, No. 13 C 9153, 2015
WL 1888513, at *7 (N.D. Ill. Apr. 24, 2015).
There are some indications that SEI and SulzCo are interrelated. Both
companies operate in the same geographical area in Iowa, in the same industry
(although SulzCo started out performing only smaller repair jobs), with the same or
similar customers. Tyler and Zack based their business plan off of SEI’s work. There
is also some overlap in the workforce. SulzCo employed some former SEI employees
and subcontracted SEI employees for several projects. SulzCo purchased and rented
equipment from SEI. Though SEI also sold and rented equipment to other
companies and sold equipment at auctions.
But the companies’ day-to-day operations are not entirely intertwined. SEI
and SulzCo operate from different offices and have different bank accounts. SulzCo
obtained funding through Tyler, Zack, and Tim’s personally guaranteed loans. SEI
never assisted SulzCo with loans or lines of credit, and SEI never assigned
excavating jobs to SulzCo. Although SulzCo stores equipment on Barry’s personal
property, it does not utilize SEI property. Tyler performed accounting work at both
companies, but once he left SEI he was paid by them as a consultant, not an
employee, and performed SEI work only on SEI computers (or by remotely accessing
SEI computers). Although there is some evidence indicating that the companies’
operations were interrelated, a fact-finder could not find that SEI and SulzCo were
single employers because the other three factors are missing.
The alter-ego doctrine applies where the successor is merely a disguised
continuance of a former company, Int’l Union of Operating Engineers, Local 150 v.
Centor Contractors, Inc., 831 F.2d 1309, 1312 (7th Cir. 1987), or where the entity
arguably seeking to avoid its obligations exists alongside its alleged alter ego. Cent.
States, Se. & Sw. Areas Pension Fund v. Sloan, 902 F.2d 593, 597 (7th Cir. 1990)
(noting that the alter-ego doctrine is not limited to fact patterns where the original
employer has disappeared entirely). The alter-ego analysis is similar to the singleemployer analysis, but an alter ego can exist even where there is no evidence of
actual common ownership. Id. A plaintiff must show more than the single-employer
factors to establish that one organization is the alter ego of another. Id. The key to
the alter-ego analysis is a finding of “unlawful motive or intent.” Trustees of IBEW
Local 701, 995 F.2d at 789.
Tyler and Zack intended to start a new, non-union company, but it is the
intent of the signatory to the collective bargaining agreement—here SEI (i.e., Jerry
or Barry)—to avoid its obligations under the agreement that matters.5 See RKN
Concrete Constr., 2015 WL 1888513, at *8–9 (looking to the lack of unlawful motive
of a collective bargaining agreement signatory); Chicago Dist. Council of Carpenters
Pension Fund v. Vacala Masonry, Inc., 967 F.Supp. 309, 317 (N.D. Ill. 1997) (same).
Plaintiffs do not dispute that it is the signatory’s intent that is relevant, and they
respond that Jerry’s unlawful intent can be inferred from the record because he
approved of SulzCo’s formation and he agreed that SEI’s union contracts made it an
uncompetitive “dinosaur” in the local, largely nonunion industry. While the
undisputed record shows, at most, that Jerry was “fine” with SulzCo’s formation
once he found out about it, it does not show that he instigated SulzCo’s formation to
avoid SEI’s collective bargaining agreement obligations (although his retirement
may have been the catalyst). See  ¶ 27; [45-2] at 47:10–12. His characterization
of SEI as a dinosaur was in response to being questioned about Zack and Tyler’s
lack of interest in taking over SEI. [45-2] at 87:22–88:3 (“Q. They were not
interested in taking over SEI? A. No. SEI, with the union contract, is basically like
the dinosaur. It is pretty hard to compete. Q. Okay. So they didn’t want that union
Defendants also argue that the intent to create a new, non-union company was not
unlawful—and instead motivated by other concerns, including avoiding family drama,
starting from a clean slate, and ensuring Tim’s assistance.
contract? A. No.”). It does not show Jerry’s intent to disguise SEI as SulzCo to avoid
SEI’s obligations. Plaintiffs have not identified anything in the record showing SEI’s
or Jerry’s intent to avoid their obligations under the collective bargaining
agreement. Without such a showing, plaintiffs cannot establish that the signatory—
SEI—sought to avoid its collective bargaining agreement obligations by creating
SulzCo as an alter ego.
Assumption of Obligations
A successor company may be bound by its predecessor’s collective bargaining
agreement obligations when: (1) there is “‘substantial continuity of identity in the
business enterprise’ before and after a change of ownership”—which necessarily
includes “a substantial continuity in the identity of the work force across the change
in ownership”—and (2) the successor has expressly or impliedly assumed the
contractual obligations. Howard Johnson Co. v. Detroit Local Joint Exec. Bd., Hotel
& Rest. Emp. & Bartenders Int’l Union, 417 U.S. 249, 263 (1974) (quoting John
Wiley & Sons v. Livingston, 376 U.S. 543, 551 (1964). Requiring both “substantial
continuity in the identity of the work force” and an express or implied assumption
balances the protection of employee interests with a new employer’s right to operate
with an independent labor force. Howard Johnson Co., 417 U.S. at 255, 264. An
employer may impliedly assent to and assume an obligation “by a consistent pattern
of conduct conforming to the terms of the agreement.” Audit Servs., Inc. v. Rolfson,
641 F.2d 757, 764 (9th Cir. 1981) (holding that a successor assumed the obligation
to contribute to trust funds where it behaved as if it had signed the collective
Defendants argue that there was no substantial continuity in the work force
because, other than Zack and Tyler, SulzCo only hired three former SEI
employees—several SEI employees were never hired—and it never assumed SEI’s
Local 150 obligations, either explicitly or implicitly. Plaintiffs argue that there was
continuity in the work force because SulzCo repeatedly subcontracted SEI’s
employees, that SulzCo explicitly assumed SEI’s obligations by subcontracting SEI
employees, and that SulzCo implicitly assumed SEI’s obligations by paying
Estabrook a bonus equaling the pension benefits that he would have received under
the Local 150 contract.
The assumption doctrine does not apply in this case because there was no
substantial continuity of identity in the business enterprise before and after a
change of ownership. There was no change in ownership at all—SEI and SulzCo
existed at the same time. SulzCo did not buy SEI, only some of its equipment.
SulzCo may have subcontracted some SEI employees, hired a few after they were
let go from SEI, and rented some of SEI’s equipment, but there was no asset
purchase, no merger, no change in ownership, and no successor-predecessor
relationship as contemplated in Howard. This situation is a poor fit for the
assumption doctrine. Substantial continuity is shown when a successor hires a
majority of a predecessor’s employees or when employees are retained in the
transition from one corporate organization to another, Howard Johnson Co., 417
U.S. at 263, not when employees are still retained by one company and
subcontracted to another company paying for their services. See Steinbach v.
Hubbard, 51 F.3d 843, 847 (9th Cir. 1995) (holding that a company that leased
assets of another company for three to four months was not a successor for
imposition of liability). Though the single-employer and alter-ego doctrines can
create joint liability for concurrently existing companies, plaintiffs have cited no
authority for extending the assumption doctrine beyond a predecessor-successor
continuity between SEI and SulzCo, the record does not establish SulzCo’s explicit
or implicit assumption of SEI’s Local 150 obligations. There was no explicit
assumption because SulzCo never agreed verbally or in writing to assume SEI’s
obligations. Plaintiffs’ argument that SulzCo explicitly agreed to assume Local 150
contract obligations by repeatedly subcontracting SEI employees is based on
implicit assumption, not explicit assumption. And it is undisputed that the union
contract permitted subcontracting arrangements. Without more, plaintiffs cannot
show explicit adoption of SEI’s obligations.
Plaintiffs have also failed to show a genuine dispute of fact over implicit
assumption. Even if SulzCo’s bonus to Estabrook was intended to equal the benefits
he would have received under the Local 150 contract (a fact disputed by the
parties), that fact alone is insufficient to show implicit assumption. See Moriarty v.
Consol. Funeral Servs., Inc., 65 F.Supp.2d 853, 864 (N.D. Ill. 1999) (holding that
paying the same salary as the previous owner—who was a signatory to the union
contract—was insufficient evidence to raise a genuine issue of material fact). The
assumption doctrine does not apply to SulzCo.
Plaintiffs and SEI also recognize that another theory of liability exists—the
“successorship” or “successor liability” doctrine. But although plaintiffs reference
this theory, they developed no argument based on it and do not respond to SEI’s
arguments that this doctrine does not apply.  at 5;  at 6. Plaintiffs have
waived any argument based on this theory of liability. See Hassebrock v. Bernhoft,
815 F.3d 334, 342 (7th Cir. 2016) (arguments not made at summary judgment are
Plaintiffs’ motion for summary judgment, , is denied. Defendants’ motions
for summary judgment, , , are granted.
Manish S. Shah
United States District Judge
Date: September 14, 2017
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