Trustees of the Iron Workers District Council of New England Pension, Health and Welfare, Annuity, Vacation, and Education Funds v. Monadnock Steel & Precast LLC et al

Filing 33

Chief Judge Patti B. Saris: MEMORANDUM and ORDER entered. For the foregoing reasons, the Court DENIES Defendants' motion to dismiss, and the motion for summary judgment is DENIED without prejudice (Docket No. 8 ). (Geraldino-Karasek, Clarilde)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS

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Plaintiffs,
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v.
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MONADNOCK STEEL & PRECAST LLC; )
MONADNOCK IRON, LLC; AND MARK )
AHO
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Defendants.
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_______________________________)
TRUSTEES OF THE IRON WORKERS
DISTRICT COUNCIL OF NEW
ENGLAND PENSION, HEALTH AND
WELFARE ANNUITY, VACATION, AND
EDUCATION FUNDS, AND OTHER
FUNDS

Civil Action
No. 17-10318-PBS

MEMORANDUM AND ORDER
October 13, 2017

Saris, C.J.
INTRODUCTION
This is an action under the Employee Retirement Income
Security Act (“ERISA”), 29 U.S.C. § 1132, to recover delinquent
contributions to trust funds administered by Plaintiffs,
Trustees of the Iron Workers District Council of New England
Pension, Health & Welfare, Annuity, Vacation, Education Funds
(“Trustees”). Defendants, Monadnock Steel & Precast LLC
(“Monadnock Steel”), Monadnock Iron, LLC (“Monadnock Iron”), and
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Mark Aho have filed a motion to dismiss or, in the alternative,
for summary judgment (Docket No. 8).

After hearing, the Court

DENIES the motion to dismiss and DENIES the motion for summary
judgment without prejudice.
FACTUAL BACKGROUND
When all reasonable inferences are drawn in favor of
Plaintiffs, the complaint alleges the following facts.
Defendant Aho owned and managed Monadnock Iron, a limited
liability company located in Rindge, New Hampshire, which
engaged in steel erection and installation subcontracting. On
October 30, 2007, Aho signed a collective bargaining agreement
on behalf of Monadnock Iron with local unions (“Iron-CBA”),
which required it to make contributions to the Taft-Hartley
trust fund administered by Plaintiffs for each hour worked by
any employee for pension, health insurance, and other employee
benefits. Monadnock Iron was dissolved in July 2011.
In September 2015, to avoid the Iron-CBA, Aho formed
Monadnock Steel, located at 52 Whittemore Hill Road, New
Ipswich, New Hampshire, which was previously the Registered
Office Address provided for the Registered Agent of Monadnock
Iron, Aho. Like Monadnock Iron, its principal purposes are steel
erection and installation subcontracting. As owner or controller
of Monadnock Steel, Aho submits bids to customers, negotiates
bid prices, engages in other contract negotiations, hires
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employees, and coordinates the work and operation of Monadnock
Steel. Operating under Monadnock Steel, Aho refused to pay
contributions on at least three construction sites in
Massachusetts.
STANDARD
When reviewing a motion to dismiss the Court asks “whether
the well-pleaded factual allegations, viewed in the light most
favorable to the plaintiff, state a claim for which relief can
be granted.” Germanowski v. Harris, 854 F.3d 68, 71 (1st Cir.
2017). Plaintiffs’ facts, which are taken as true, and the
inferences they support must “‘plausibly narrate a claim for
relief.’” Id. at 71 (quoting Schatz v. Republican State
Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012)).
For a claim to be plausible, it must plead “factual content
that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Germanowski,
854 F.3d at 72 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). However, “a complaint need not plead facts sufficient
to make a prima facie case or allege all facts necessary to
succeed at trial.” Medina-Velázquez v. Hernández-Gregorat, 767
F.3d 103, 108 (1st Cir. 2014). A well-pleaded complaint can go
forward even if recovery is unlikely and proof of the necessary
facts are unviable. See id. at 109; see also Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007); Ocasio–Hernández v. Fortuño–
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Burset, 640 F.3d 1, 12 (1st Cir. 2011). “Ultimately, ‘the
relevant inquiry focuses on the reasonableness of the inference
of liability that the plaintiff is asking the court to draw from
the facts alleged in the complaint.’” Medina-Velázquez, 767 F.3d
at 109 (quoting Ocasio–Hernández, 640 F.3d at 13) (internal
brackets removed). The court may take judicial notice of
undisputed facts from public records. See Giragosian v. Ryan,
547 F.3d 59, 66 (1st Cir. 2008) (“A court may consider matters
of public record in resolving a Rule 12(b)(6) motion to
dismiss.”).
DISCUSSION
Plaintiffs allege that Aho formed Monadnock Steel as an
alter ego in order to avoid the contributions under the IronCBA. Monadnock Steel, they allege, is substantially similar to
Monadnock Iron with respect to business purposes, ownership,
management, customers, and operations in manner, activity, and
geographic area. Defendants contend that Monadnock Steel was
formed four years after Monadnock Iron by Aho’s son-in-law and
that it is not an alter ego. They deny that Aho owns or controls
Monadnock Steel. Both sides have submitted warring affidavits.
Because there has been no discovery, the Court will address the
motion to dismiss, and defer ruling on summary judgment.
Under the alter ego doctrine, “in certain situations one
employer entity will be regarded as a continuation of a
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predecessor, and the two will be treated interchangeably for
purposes of applying labor laws.” NLRB v. Hosp. San Rafael,
Inc., 42 F.3d 45, 50 (1st Cir. 1994). The nature of an alter ego
claim is that the new or successor company operates as a straw
man or as a “disguised continuance” in order to avoid liability.
Southport Petroleum Co. v. NLRB, 315 U.S. 100, 106 (1942). Alter
ego claims can “prevent the evasion of pension obligations,
thereby protecting employee benefits and denying employers an
unearned advantage in [their] labor activities.” Groden v. N&D
Transp. Co., 866 F.3d 22, 27 (1st Cir. 2017) (internal citations
omitted). Several factors are used to determine whether an alter
ego exists 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.” Id. at 27
(internal citations and quotations omitted). However, “[n]o one
factor is controlling, and all need not be present to support a
finding of alter ego status.” C.E.K. Indus. Mech. Contractors,
Inc. v. NLRB, 921 F.2d 350, 354 (1st Cir. 1990).
When assessing continuity of ownership, courts consider
family relationships between the two companies and who is
exerting financial control. See Mass. Carpenters Cent.
Collection Agency v. Belmont Concrete Corp., 139 F.3d 304, 309
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(1st Cir. 1998) (“Continuity of ownership has been found to
exist when the nonsignatory and signatory companies are owned by
members of the same family . . . . This [is] especially telling
when the named owners of the nonsignatory have little
responsibility or control over the management of the company,
and do not have a financial investment in the company.”).
A hiatus in the time period between the operations of the
two companies is relevant to whether there is a sufficient
continuity. However, “such a hiatus is only one factor in the
‘substantial continuity’ calculus and thus is relevant only when
there are other indicia of discontinuity.” Fall River Dyeing &
Finishing Corp. v. NLRB, 482 U.S. 27, 45 (1987) (involving a
seven-month hiatus). “[I]f other factors indicate a continuity
between the enterprises, and the hiatus is a normal start-up
period, the ‘totality of the circumstances’ will suggest that
these circumstances present a successorship situation.” Id.
Moreover, substance trumps form in a determination of the
similarity of the purposes and management. When there has been a
“a mere technical change in the structure or identity . . .
without any substantial change in its ownership or
management . . . courts have had little difficulty holding that
the successor is in reality the same employer and is subject to
all the legal and contractual obligations of the predecessor.”
Hosp. San Rafael, 42 F.3d at 51 (quoting Howard Johnson Co. v.
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Hotel Employees, 417 U.S. 249, 259 (1974)). Courts examine
whether the business “basically has the same body of customers”
to determine alter ego status. Fall River, 482 U.S. at 43.
Finally they look at whether defendants harbor anti-union
animus, which refers to “whether the alleged alter ego entity
was created and maintained in order to avoid labor obligations.”
Mass. Carpenters, 139 F.3d at 308 (quoting Hosp. San Rafael, 42
F.3d at 50).
Looking at the totality of the circumstances, the Court
concludes that the complaint alleges sufficient facts to survive
the motion to dismiss. It is true that there was a four year
time lapse between the date Monadnock Iron dissolved and when
Monadnock Steel was formed, militating against continuity.
However, a hiatus of a substantial period is not an ironclad bar
to alter ego status. Rather, a significant hiatus “is only one
factor” in the alter ego analysis. Fall River, 482 U.S. at 45;
see Straight Creek Mining, Inc. v. NLRB, 164 F.3d 292, 296 (6th
Cir. 1998) (holding 54-month hiatus did not destroy continuity
in light of other circumstances). That is, Monadnock Steel was
formed by Mr. Aho’s son-in-law, and has an address which was the
registered address of Monadnock Iron’s registered agent, Mr.
Aho. Monadnock Iron and Monadnock Steel conduct the same
business operations and purposes: they both perform steel and
precast erection. While there are no specific allegations to
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support ownership, the Plaintiffs allege Mr. Aho manages and
operates Monadnock Steel, in areas like hiring and work
coordination. Both companies appear to have similar geographic
ties and similar customers. Finally, and of significant weight,
Plaintiffs allege anti-union animus by pointing out there was a
lawsuit involving failure to make contributions under ERISA by
another company, Monadnock Erectors, owned by Aho, who allegedly
set up Monadnock Iron as an alter ego.1
When these allegations are taken together, Plaintiffs state
a plausible claim.
ORDER
For the foregoing reasons, the Court DENIES Defendants’
motion to dismiss, and the motion for summary judgment is DENIED
without prejudice (Docket No. 8).

/s/ PATTI B. SARIS
Patti B. Saris
Chief United States District Judge

1
  There is also a legal dispute as to whether the CBA’s “work
preservation clause” is binding even if there is no alter ego status.
Plaintiffs contend no notice of termination was sent so the CBA is
still binding. The Court need not address this issue in light of the
holding on alter ego status.

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