McAnarney et al v. Absolute Environmental, Inc. et al
Filing
56
Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER, denying 44 MOTION to Dismiss The Amended Verified Complaint filed by Absolute Environmental Contractors, Inc., Absolute Environmental, Inc..(Lima, Christine)
United States District Court
District of Massachusetts
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Plaintiffs,
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v.
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ABSOLUTE ENVIRONMENTAL, INC. and )
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ABSOLUTE ENVIRONMENTAL
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CONTRACTORS, INC.
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Defendants.
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BARRY C. MCANARNEY, as he is
EXECUTIVE DIRECTOR,
MASSACHUSETTS LABORERS’ HEALTH
AND WELFARE FUND, MASSACHUSETTS
LABORERS’ PENSION FUND, and
MASSACHUSETTS LABORERS’ ANNUITY
FUND; JAMES V. MERLONI, JR., as
he is ADMINISTRATOR, NEW ENGLAND
LABORERS’ TRAINING TRUST FUND;
and JOSEPH BONFIGLIO, as he is
TRUSTEE, MASSACHUSETTS LABORERS’
LEGAL SERVICES FUND,
Civil Action No.
15-12985-NMG
MEMORANDUM & ORDER
GORTON, J.
Plaintiffs, five employee benefit plans and their
individual director, administrator and trustee (collectively
“plaintiffs” or “the Funds”) bring this action against the
employer of their beneficiaries to enforce the alleged
obligation of that employer to make contributions and to pay
interest due under a collective bargaining agreement.
Plaintiffs allege that defendants Absolute Environmental, Inc.
(“AEI”) and Absolute Environmental Contractors, Inc. (“AEC”)
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(collectively “defendants”) have violated the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§
1145 and 1132 and the Labor Management Relations Act (“LMRA”),
29 U.S.C. § 185.
Pending before this Court is defendants’
motion to dismiss.
For the reasons that follow, the motion to
dismiss will be denied.
I.
Background
Plaintiffs are five employee benefit plans and three
individual directors, administrators and trustees.
Plaintiff
Barry McAnarney is the Executive Director of three of the
plaintiff funds which are administered in Burlington,
Massachusetts: (1) the Massachusetts Laborers’ Health and
Welfare Fund, an employee welfare benefit plan which provides
health, dental and prescription benefits and insurance to its
participants, (2) the Massachusetts Laborers’ Pension Fund, an
employee pension benefit plan providing participants with a
defined pension benefit and (3) the Massachusetts Laborers’
Annuity Fund, an employee pension benefit plan which acts as a
defined contribution fund.
Plaintiff James Merloni, Jr. is the Administrator of
plaintiff New England Laborers’ Training Trust Fund, an employee
welfare benefit plan administered in Hopkinton, Massachusetts
which trains apprentices and journey workers in the construction
industry.
Plaintiff Joseph Bonfiglio is a Trustee of plaintiff
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Massachusetts Laborers’ Legal Services Fund, an employee welfare
benefit plan administered in Burlington, Massachusetts.
Defendant AEI is a New Hampshire corporation with its
principal place of business in Salem, New Hampshire and
defendant AEC is a Massachusetts corporation with its principal
place of business in Haverhill, Massachusetts.
AEI is an
asbestos abatement contractor that was incorporated in 2004 and
operated as a non-union contractor until 2010.
In January,
2010, AEI signed the Wrecking and Environmental Remediation
Acceptance of Agreement and Declaration of Trust (“the
Acceptance”) through which it became a party to the collective
bargaining agreement between the Massachusetts Laborers District
Council Union and the Massachusetts State-Wide Wrecking and
Environmental Remediation Specialists Association, Inc. (“the
CBA”).
The CBA requires that signatory employers make
contributions to the plaintiff funds for each hour worked by
covered employees at the rates prescribed therein.
After an
employee has met the hours requirement set out by the fund, that
employee is entitled to health and welfare benefits.
Three
months after AEI became a signatory to the CBA, it caused AEC to
be incorporated in Massachusetts.
AEC is not a signatory to the
CBA and undertakes non-union “open shop” work.
In its filings
with the Massachusetts Secretary of State, AEC identified Elaine
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McCaffrey and Susan Quinn, the wives of AEI owners Gary
McCaffrey and Richard Quinn, as AEC’s directors.
Plaintiffs
allege that Gary McCaffrey and Richard Quinn manage both
companies and that their wives are not involved in the
operations of either company.
Plaintiffs allege that AEC performs the same work that AEI
performs, within the territorial jurisdiction of the CBA.
They
contend that AEI and AEC both operate out of the same address in
Salem, New Hampshire where both companies use the same trucks,
estimator, clerical staff and supervisors.
Plaintiffs assert
that laborers receive their checks each week from the Salem
office regardless of whether they completed jobs for AEI or AEC
and that many of laborers work interchangeably for both
companies.
They allege that one laborer, Jean Jimenez, reported
to the Salem office to collect his checks where he was asked if
he had a “union” or “non-union” job.
According to plaintiffs,
employees at the office would provide a different-colored
paycheck depending on whether the job was union or non-union and
those paychecks reflected different rates of pay and deductions.
Plaintiffs describe other overlapping functions of the
companies, including the sharing of the same website and email
address.
Plaintiffs brought this action in July, 2015 and filed an
amended complaint in April, 2016, alleging violations of ERISA
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and the LMRA.
The parties jointly moved to stay the case and it
was stayed from May, 2016 until June, 2017.
In June, 2017,
defendants moved to dismiss the amended complaint and that
motion is the subject of this memorandum.
II.
Defendant’s Motion to Dismiss
A.
Legal Standard
To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to “state a claim
to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007).
In considering the merits of
a motion to dismiss, the Court may look only to the facts
alleged in the pleadings, documents attached as exhibits or
incorporated by reference in the complaint and matters of which
judicial notice can be taken. Nollet v. Justices of Trial Court
of Mass., 83 F. Supp. 2d 204, 208 (D. Mass. 2000), aff’d, 248
F.3d 1127 (1st Cir. 2000).
Furthermore, the Court must accept
all factual allegations in the complaint as true and draw all
reasonable inferences in the plaintiff's favor. Langadinos v.
Am. Airlines, Inc., 199 F.3d 68, 69 (1st Cir. 2000).
Although a
court must accept as true all of the factual allegations
contained in a complaint, that doctrine is not applicable to
legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662 (2009).
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B.
Application
Defendants contend that plaintiffs’ alter ego theory
fails as a matter of law because plaintiffs do not allege that
AEI and AEC deceived or defrauded the Funds or that AEC was used
to divert business away from AEI.
According to defendants,
because AEI was incorporated first and operated as a non-union
company for several years before it entered into the CBA and
before AEC was incorporated, AEC was not created for an improper
purpose.
Defendants aver that plaintiffs’ alternative theory,
that AEC and AEI are, in fact, a single employer with a unified
bargaining unit, is unavailing because it is insufficient to
bind a non-signatory to a CBA.
Furthermore, defendants suggest
that this Court lacks jurisdiction to make a single employer
determination.
The Funds respond that the complaint alleges facts
sufficient to infer that AEI and AEC were alter egos.
They
rejoin that defendants’ attempt to import fraud into the alter
ego analysis misapprehends the case law of this Circuit.
Plaintiffs submit that they have alleged facts demonstrating
continuity of ownership, similarities in management, business
purpose, operation, equipment, customers and supervision and
anti-union animus.
The Funds assert that, in the alternative,
this Court has jurisdiction to make a single employer
determination.
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Under the alter ego doctrine, two employers can, in certain
situations, be treated interchangeably for purposes of applying
labor laws. N.L.R.B. v. Hosp. San Rafael, Inc., 42 F.3d 45, 50
(1st Cir. 1994).
To determine whether a nonsignatory employer
is an alter ego of a signatory to a collective bargaining
agreement, a court must consider several factors including
continuity of ownership, similarity of the two companies in
relation to management, business purpose, operation,
equipment, customers, supervision, and anti-union animus—
i.e., whether the alleged alter ego entity was created and
maintained in order to avoid labor obligations.
Mass. Carpenters Cent. Collection Agency v. Belmont Concrete
Corp., 139 F.3d 304, 308 (1st Cir. 1998) (citing Hosp. San
Rafael, 42 F.3d at 51).
Although the doctrine is typically
applied where a successor employer is “merely a disguised
continuance of the old employer”, created to avoid obligations
under a collective bargaining agreement, it also has been
utilized where the companies are not successors but rather
engaged in parallel operations. C.E.K. Indus. Mechanical
Contractors, Inc. v. N.L.R.B., 921 F.2d 350, 354 (1st Cir. 1990)
(citing Southport Petroleum Co. v. N.L.R.B., 315 U.S. 100, 106
(1942)).
Defendants’ contention that fraud is an “indispensable
element” in the alter ego analysis is futile.
doctrine is an equitable one and is a
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The alter ego
tool to be employed when the corporate shield, if
respected, would inequitably prevent a party from receiving
what is otherwise due and owing from the person or persons
who have created the shield.
Mass. Carpenters Cent. Collection Agency v. A.A. Bldg. Erectors,
Inc., 208 F. Supp. 2d 94, 98 (D. Mass. 2002) (citing Hosp. San
Rafael, 42 F.3d at 51).
In A.A. Bldg. Erectors, the First
Circuit Court of Appeals (“the First Circuit”) considered
whether a company and its subsidiary were alter egos.
In that
case, Kalwall Corporation was, and always had been a non-union
entity.
Id. at 19-20.
Kalwall created an affiliated unionized
installation contractor, A.A. Building, to employ union workers
and A.A. Building entered into a collective bargaining agreement
with a number of employee pension benefit and welfare funds. Id.
Plaintiffs brought suit, alleging that A.A. Building was an
alter ego of Kalwall designed to allow Kalwall to avoid its
obligations under the collective bargaining agreement. Id.
On the summary judgment record, the district court found
that A.A. Building was not formed by Kalwall to avoid its
obligations under the collective bargaining agreement which had
not yet been entered into at the time A.A. Building was
established. Mass. Carpenters Cent. Collection Agency v. A.A.
Bldg. Erectors, Inc., 208 F. Supp. 2d 94, 98 (D. Mass. 2002),
aff’d, 343 F.3d at 23.
In affirming the district court, the
First Circuit noted that the alter ego doctrine generally
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applies where a company with obligations under a collective
bargaining agreement undertakes some structural change, such as
the creation of a successor, to evade its obligations. A.A.
Bldg. Erectors, 343 F.3d at 22.
To apply that doctrine in
reverse, where a non-union entity establishes a union entity
which subsequently enters into a collective bargaining
agreement, would require some evidence that the purpose of the
doctrine would be served by its application. Id.
In examining whether A.A. Building was created to allow
Kalwall to escape is obligations under a collective bargaining
agreement, the First Circuit noted that (1) there was no
evidence that A.A. Building deceived the union about its
relationship with Kalwall or the fact that Kalwall operated
primarily as a non-union entity and (2) there was no evidence
that the union received less than what it bargained for. Id. at
22.
Defendants attempt to shoehorn the facts of this case to
match the scenario present in A.A. Bldg. Erectors.
They contend
that because AEI operated as a non-union shop for almost six
years before entering into the CBA, it did not incorporate AEC
to evade its obligations.
Unlike A.A. Bldg. Erectors, where a
non-union entity created a union entity, here we have a nonunion entity transmuting into a union entity but then creating a
non-union entity, AEC.
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Plaintiffs have pled facts sufficient to suggest that the
formation of AEC had the effect of allowing AEI to avoid its
labor obligations under the CBA.
They allege that (1) the
companies worked together to evade their obligations to the
Funds and (2) laborers were assigned AEC jobs for which they did
not receive credited hours necessary for union benefits or
contributions to annuity accounts.
Plaintiffs’ allegations, if
proven, would establish that:
the union membership with rights under a collective
bargaining agreement has been [adversely affected]
following some change in the structure or operations of the
employer with whom the collective bargaining agreement was
negotiated.
Id. at 22; see also Raso v. Pegasus & Sons Masonry Co., Inc.,
110 F. Sup. 3d 284, 288 (denying a motion to dismiss after
finding that “the allegations plausibly suggest potential
inequities which may further support a finding of alter ego
liability”).
Furthermore, “the order of creation of the union and nonunion aspects of the double-breasted operation is not
determinative” for the purposes of finding alter ego liability.
United States v. Thompson, 207 F. Supp. 3d 106, 111 (D. Mass.
2016).
Rather the doctrine is flexible and can apply,
regardless of the timing of the companies’ creation, where a
parallel structure “makes it possible to skirt CBA obligations
by siphoning off union work to the non-union affiliate”. Id.
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Beyond its allegations that AEC was established to help AEI
evade obligations under the CBA, plaintiffs plausibly allege
facts supporting a finding of other relevant factors in the
alter ego analysis.
They contend that AEI and AEC are
controlled by McCaffrey and Quinn despite AEC being formally
owned by their wives. See e.g., Belmont Concrete, 139 F.3d at
308 (“Continuity of ownership has been found to exist when the
nonsignatory and signatory companies are owned by members of the
same family.”).
Furthermore, the Funds allege facts suggesting
that AEI and AEC share (1) the same equipment and trucks, (2)
the same office space and (3) the same employees and customers.
In sum, the facts alleged in plaintiffs’ complaint are
sufficient, if proved, to establish that AEC and AEI are alter
egos.
Because plaintiffs have pled facts sufficient to state a
claim for relief under the alter ego theory, the Court declines
to consider their alternative single employer theory.
ORDER
For the foregoing reasons, defendants’ motion to dismiss
(Docket No. 44) is DENIED. So ordered.
/s/ Nathaniel M. Gorton_____
Nathaniel M. Gorton
United States District Judge
Dated April 30, 2018
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