Michigan Laborers' Pension Fund et al v. Rite Way Fence, Incorporated et al

Filing 53

OPINION AND ORDER Granting in Part and Denying in Part Plaintiffs' 36 Motion for Summary Judgment. Signed by District Judge Matthew F. Leitman. (Monda, H)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
MICHIGAN LABORERS’
PENSION FUND, et al.,
Plaintiffs,

Case No. 13-cv-13727
Hon. Matthew F. Leitman

v.
RITE WAY FENCE, INC., et al.,
Defendants.
__________________________________________________________________/
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT (ECF #36)
Plaintiffs Michigan Laborers’ Pension Fund, et al., brought this ERISA
action against Defendants Rite Way Fence, Inc. (“Rite Way”), Marx Contracting,
Inc. (“Marx”), Eugene Zapczynski (“Zapczynski”), and Mark Grundner
(“Grundner”) to recover fringe benefits allegedly owed under certain collective
bargaining agreements.

Plaintiffs moved for summary judgment against the

Defendants, jointly and severally, in the amount of $204,894.53.

(See the

“Motion,” ECF #36.) For the reasons explained below, the Court GRANTS IN
PART and DENIES IN PART Plaintiffs’ Motion.

RELEVANT FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Plaintiffs are employee fringe benefit funds subject to the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq.
(See Declaration of Plaintiffs’ Trustee Michael Nystrom, ECF #60 at ¶9.)
Plaintiffs provide healthcare, pension, vacation, and other benefits to laborers in
the road construction industry who meet certain eligibility requirements. (See id.
at ¶¶4, 9.) Plaintiffs are funded by contributions from beneficiaries’ employers
pursuant to collective bargaining agreements. (See id. at ¶10.)
Rite Way and Marx build and install fencing and guardrails.

(See

Zapczynski Deposition, ECF #36-3 at 15, 21; Pg. ID 274, 276.) Zapczynski is the
sole owner and officer of Rite Way. (See id. at 13-14, Pg. ID 274.) Zapczynski
owns 60 percent of Marx; Grundner owns the remaining 40 percent. (See id. at 20,
Pg. ID 275.) Zapczynski and Grundner are also officers of Marx. (See id. at 1820, Pg. ID 275.)
Rite Way and Marx each entered into collective bargaining agreements with
Plaintiffs.

(See the “Agreements,” ECF #36-5 and #36-6.

See also the

“Clarification,” ECF #36-7.) The Agreements required Rite Way and Marx to
make monthly contributions to Plaintiffs at defined hourly rates for covered work
performed by covered employees. (See ECF #36-5 at 9-11, Pg. ID 394-96 and
ECF #36-6 at 7-9, Pg. ID 415-17.)
2

Plaintiffs periodically audited Rite Way and Marx to ensure that the
companies made all required benefit contributions. (See Declaration of Auditor
Dawn Aldrich (“Aldrich”), ECF #36-2 at ¶9.) As relevant here, Plaintiffs audited
Rite Way for the periods between September 2007 to March 2012 (the “First Rite
Way Audit”) and April 2012 to May 2013 (the “Second Rite Way Audit”). (See id.
at ¶¶10-11, 22.) Plaintiffs audited Marx for the periods between September 2007
to April 2012 (the “First Marx Audit”) and May 2012 to May 2013 (the “Second
Marx Audit”). (See id. at ¶23.) The audits concluded that Rite Way and Marx had
each failed to make required contributions for certain covered work performed by
covered employees during the relevant time periods. (See id. at ¶¶11, 22-23.)
Plaintiffs filed this action on August 30, 2013. (See the Complaint, ECF
#1.) Plaintiffs alleged that Defendants’ failure to make required contributions (1)
violated the Agreements and ERISA §§ 1132(a)(3) and 1145, and (2) breached
Defendant’s fiduciary duties to Plaintiffs in violation of ERISA §§ 1104(a)(1),
1103(c)(i). (See id. at ¶¶27-40.)
Plaintiffs now seek summary judgment in the amount of $204,894.53,
representing Rite Way’s and Marx’s unpaid benefit contributions, interest, audit
assessments, and audit costs. (See Mot. at 1, Pg. ID 210.) Plaintiffs seek judgment
against each Defendant jointly and severally. (See id.) Plaintiffs contend that Rite
Way and Marx are each liable for the other’s unpaid contributions and associated
3

costs because they are alter egos and/or operate as a single employer. (See id. at
17-21, Pg. ID 238-42.) Plaintiffs further argue that Zapczynski and Grundner are
personally liable because they operated Rite Way and Marx without regard to
corporate formalities and with little separation between corporate and personal
finances. (See id. at 21-25, Pg. ID 242-46.)
The Court heard oral argument on Plaintiffs’ Motion on March 3, 2015.
(See Hearing Transcript, ECF #51.) For the reasons explained below, the Court
GRANTS IN PART and DENIES IN PART Plaintiffs’ Motion.
GOVERNING LEGAL STANDARD
A movant is entitled to summary judgment when it “shows that there is no
genuine dispute as to any material fact....” U.S. SEC v. Sierra Brokerage Services,
Inc., 712 F.3d 321, 326–27 (6th Cir. 2013) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 251–52 (1986)) (quotations omitted). When reviewing the record,
“the court must view the evidence in the light most favorable to the non-moving
party and draw all reasonable inferences in its favor.” Id. “The mere existence of a
scintilla of evidence in support of the [non-moving party’s] position will be
insufficient; there must be evidence on which the jury could reasonably find for
[that party].” Anderson, 477 U.S. at 252. Summary judgment is not appropriate
when “the evidence presents a sufficient disagreement to require submission to a
jury.” Id. at 251-252. Indeed, “[c]redibility determinations, the weighing of the
4

evidence, and the drafting of legitimate inferences from the facts are jury
functions, not those of a judge…” Id. at 255.
ANALYSIS
1. Plaintiffs Are Entitled to Summary Judgment Against Rite-Way as to
Unpaid Contributions that Rite Way Has Admitted Owing and as to
Associated Costs and Fees, But Plaintiffs Are Not Entitled to Judgment as
to The Remainder of Their Claimed Damages Against Rite-Way
Plaintiffs contend that they are entitled to judgment as a matter of law
against Rite-Way in the amount $195,546.71. (See Mot. at 5, Pg. ID 226. See also
Aldrich Decl. at ¶¶11, 22.) This amount includes $113,856.54 in unpaid benefit
contributions for the period covered by the First Rite Way Audit, plus $24,106.55
in interest; $24,106.55 in audit assessments; and $14,198.72 in audit costs
associated with those unpaid contributions. (See Mot. at 5, Pg. ID 226. See also
Aldrich Decl. at ¶11.) The amount also includes $15,088.87 in unpaid benefit
contributions for the period covered by the Second Rite Way Audit, plus $2,094.74
in interest and $2,094.74 in audit assessments associated with those unpaid
contributions. (See Mot. at 5, Pg. ID 226. See also Aldrich Decl. at ¶22.)
Rite Way has admitted that it owes Plaintiffs unpaid benefit contributions in
the amount of $82,017.08 for the period covered by the First Rite Way Audit. (See
the “Stipulated Order Partially Resolving Plaintiffs’ Claims,” ECF #31 at ¶3. See
also Tr. at 18, Pg. ID 2539.) Rite Way further concedes that it owes $17,455.51 in
interest and $17,455.51 in audit assessments on the unpaid contributions that it has
5

admitted. (See Tr. at 18-19, Pg. ID 2539-40.) Thus, there is no dispute that RiteWay owes Plaintiffs at least $116,928.10.
Rite Way argues, however, that it does not owe Plaintiffs the entire
$14,198.12 in audit costs for the First Rite Way Audit. Rite-Way says these costs
should be “prorated” because it has acknowledged liability for only a portion of the
unpaid contributions that Plaintiffs allege are due for the period covered by the
First Rite Way Audit. (Id.) The Court disagrees. “[T]he fact that Plaintiffs may
be entitled to less than they originally requested does not automatically require a
proportional reduction in … fees and costs.” Operating Eng’r Local 324 Health
Care Plan v. Dalessandro Contracting Group, LLC, No. 10-11256, 2012 WL
4513594, at *4 (E.D. Mich. Oct. 2, 2012) (declining to reduce attorneys’ fees).
Rite Way has admitted liability for the substantial majority of the unpaid
contributions allegedly due for the First Rite Way Audit. And Rite Way has not
shown any correlation between the amount of benefit contributions that it failed to
pay and the audit costs it seeks to avoid. In other words, Rite Way has not
established that Plaintiffs’ audit costs would have been lower if Rite Way had
failed to pay only $82,017.08 of benefit contributions (rather than $113,856.54, as
Plaintiffs claim). Moreover, there is no indication – and Rite Way has not argued –
that Plaintiffs performed unnecessary audits or that the auditor’s fees or hours were

6

excessive.

Under these circumstances, the Court concludes that Plaintiffs are

entitled to the full amount of their claimed audit costs.
Accordingly, with respect to the First Rite Way Audit, Plaintiffs are entitled
to judgment against Rite-Way in the amount of $131,126.22 ($82,017.08 in unpaid
contributions, plus $17,455.51 in interest; $17,455.51 in audit assessments; and
$14,198.12 in audit costs). But Plaintiffs are not entitled to judgment as a matter
of law for any additional amounts with respect to the First Rite Way Audit.
Simply put, there are disputed issues of fact as to Plaintiffs’ calculation of the
remaining unpaid contributions they seek for the First Rite Way Audit. At oral
argument, the Court identified confusion in Plaintiffs’ calculations and offered
Plaintiffs an opportunity to submit supplemental briefing to try to resolve some of
the factual issues as to their calculation of damages. (See Tr. at 29-30, Pg. ID
2550-51.) Plaintiffs submitted a supplemental brief (see ECF #52), but their new
calculations and arguments do not resolve the confusion to the Court’s satisfaction.
Thus, Plaintiffs are not entitled to judgment as a matter of law for (1) allegedlyunpaid benefit contributions for the First Rite Way Audit over and above the
$82,017.08 in unpaid contributions admitted by Rite-Way, or (2) any interest
and/or audit assessments associated with the allegedly-unpaid additional amounts.

7

Nor are Plaintiffs entitled to judgment as a matter of law for any amounts
with respect to the Second Rite Way Audit. Rite Way contends that the audit (1)
incorrectly includes Rite Way employees who are not “covered employees” under
the Agreements, and (2) fails to demonstrate that certain work hours performed by
Rite Way employees are “covered work” under the Agreements. (See  the Second
Rite Way Audit, ECF #36-14.) Plaintiffs respond that in preparing the audit,
Plaintiffs’ auditor used internal Rite Way documents that coded each of the
relevant employees as “covered employees” and represented that all work
performed in certain zones was “covered work.”

(See Aldrich Supplemental

Declaration, ECF #50-10 at ¶6.) Rite Way counters that (1) Plaintiffs’ previous
audits of Rite Way have acknowledged that the employees in dispute were not
“covered employees,” and (2) Plaintiffs’ auditor misinterpreted Rite Way’s internal
documentation regarding geographic zones. (See Tr. at 36-39, Pg. ID 2557-60; see
also ECF #45-16.) Taking this evidence in the light most favorable to Rite Way,
there are genuine issues of fact as to Plaintiffs’ entitlement to the amounts claimed
for the Second Rite Way Audit. Accordingly, Plaintiffs have not established their
entitlement to a judgment against Rite-Way in any amount over $131,126.22.
2. Plaintiffs Are Entitled to Summary Judgment Against Marx in the Amount
of $9,347.82
Plaintiffs also contend that they are entitled to judgment as a matter of law
against Marx for sums identified in the First Marx Audit and Second Marx Audit.
8

Plaintiffs acknowledge that Marx has already paid all of the delinquent benefit
contributions and audit assessments due for the period covered by the First Marx
Audit. (See Mot. at 6, Pg. ID 227. See also Aldrich Decl. at ¶25.) However,
Plaintiffs argue that Marx still owes $3,871.89 in interest and $983.83 in audit
costs for the First Marx Audit. (See Mot. at 6, Pg. ID 227. See also Aldrich Decl.
at ¶25.)

Plaintiffs further argue that Marx owes $3,194.30 in unpaid benefit

contributions for the period covered by the Second Marx Audit, plus $366.90 in
interest; $366.90 in audit assessments; and $564.00 in audit costs associated with
those unpaid contributions. (See Mot. at 7, Pg. ID 228. See also Aldrich Decl. at
¶26.)
Marx counters that Plaintiffs’ claim as to the First Marx Audit is barred by
an agreement between the parties. (See Response Brief, ECF #45 at 19, Pg. ID
1803.) Specifically, Marx insists that when it agreed to pay the delinquent benefit
contributions and audit assessments for the First Marx Audit, Plaintiffs agreed not
to pursue interest and audit costs.1 (See id.) But Marx has cited no evidence that
Plaintiffs ever made such a promise. To the contrary, it appears that Plaintiffs

1

The parties appear to disagree about which categories of debt Marx has already
paid with respect to the First Marx Audit. Plaintiffs assert that Marx has paid
$3,871.89 in audit assessments but has not paid $3,871.89 in interest. (See Mot. at
6, Pg. ID 227. See also Aldrich Decl. at ¶¶24-25.) Marx contends that it has paid
interest, but not audit assessments. (See Resp. Br. at 19, Pg. ID 1803.) However,
there is no dispute that the amount in controversy with respect to the First Marx
Audit is $4,855.72 ($3,871.89 in either interest or audit assessments, plus $983.83
in audit costs).
9

expressly refused to enter such an agreement. Indeed, when Marx asked Plaintiffs
to waive the interest and audit costs for the First Marx Audit, Plaintiffs expressly
denied the requested waiver and insisted that Marx pay the interest and audit costs.
(See ECF #50-16 and #50-17.) Marx also argues that Plaintiffs did not pursue
interest and audit costs in a prior settlement between the parties regarding unpaid
contributions not at issue in this action (see ECF #36-71), but that settlement does
not prevent Plaintiffs from pursuing interest and audit costs here. Thus, Marx
owes $4,855.72 for the time period covered by the First Marx Audit ($3,871.89 in
either interest or audit assessments, plus $983.83 in audit costs).
As to the Second Marx Audit, Marx initially argued that that there was a
question of fact as to (1) whether the work hours identified in the audit are
“covered work” pursuant to the Agreements, and (2) whether Marx therefore owes
contributions for those hours. (See Resp. Br. at 20, Pg. ID 1804.) Marx noted that
the Second Marx Audit does not attribute employee work hours to particular
projects and, thus, it is unclear whether the work is “covered work.” In response,
Plaintiffs’ auditor attested that virtually all of Marx’s projects are “covered work.”
(See Aldrich Suppl. Decl. at ¶8.)

Plaintiffs argued that it was therefore

unnecessary to identify specific projects in order to establish that Marx owes

10

contributions for the claimed hours.2 (See Reply Brief, ECF #50 at 4-5, Pg. ID
2080-81.) At oral argument, Marx conceded that the work hours identified in the
Second Marx Audit were “covered work.” (See Tr. at 45, Pg. ID 2566 (“I would
be hard pressed to say that they weren’t [covered] projects”).) In light of this
admission and the auditor’s declaration, the Court concludes that Marx owes
$4,492.10 for the time period covered by the Second Marx Audit ($3,194.30 in
unpaid benefit contributions; $366.90 in interest; $366.90 in audit assessments; and
$564.00 in audit costs).
Accordingly, Plaintiffs are entitled to judgment against Marx in the amount
of $9,347.82 ($4,855.72 for the time period covered by the First Marx Audit and
$4,492.10 for the time period covered by the Second Marx Audit).
3. Rite Way and Marx are Jointly and Severally Liable for Plaintiffs’
Damages in this Action Because They Are Alter Egos
Employers that are alter egos of one another are jointly and severally liable
for one another’s unpaid ERISA contributions and associated fees and costs. See,
e.g., Flynn v. R.C. Tile, 353 F.3d 953, 959 (D.C. Cir. 2004) and Plumbers Local 98
Defined Benefit Fund v. Wolf Mech., Inc., No. 06-12005, 2007 WL 4326924 (E.D.
Mich. Dec. 10, 2007).

Employers are alter egos if they “have substantially

2

Plaintiffs also note that Marx paid all delinquent contributions claimed in the
First Marx Audit, even though that audit did not identify the specific projects for
contributions that Plaintiffs claimed were due. (See Reply Brief, ECF #50 at 5, Pg.
ID 2081. See also Aldrich Suppl. Decl. at ¶8.)
11

identical management, business, purpose, operation, equipment, customers,
supervision and ownership.” NLRB v. Fullerton Transfer & Storage Ltd., Inc., 910
F.2d 331, 336 (6th Cir. 1990). The alter ego analysis “should be flexible.” NLRB
v. Allcoast Transfer, Inc., 780 F.2d 576, 581 (6th Cir. 1986). Thus, “no one
element [is] a prerequisite to imposition of alter ego status; rather, all the relevant
factors must be considered together.” Id. at 582 (internal citation omitted).
Plaintiffs argue that Rite Way and Marx are jointly and severally liable as
alter egos. As an initial matter, Plaintiffs note that in 2010, in a prior case between
the parties, Rite Way and Marx admitted that they were “alter egos of each other
and a single employer for the purposes of th[at] case.” See “Stipulated Order,”
ECF #36, Michigan Laborers’ Pension Fund, et al. v. Rite Way Fence, Inc., et al.,
No. 08-12996 (E.D. Mich. Apr. 6, 2010). Plaintiffs contend that this admission is
persuasive evidence of their alter ego status.
Plaintiffs also argue that the factual record in this case indicates that Rite
Way and Marx operate as alter egos. Plaintiffs note that:
 Zapcynski is the sole shareholder and officer of Rite Way, while
Zapcynski and Grundner are the sole shareholders and officers of
Marx (see Zapczynski Dep. at 13-14, 18-20; Pg. ID 274-75);
 Rite Way and Marx are in the business of installing fence and
guardrail (see id. at 15, 21; Pg. ID 274, 276);
 Rite Way and Marx perform this work solely within Michigan (see
Grundner Dep., ECF #36-24 at 19-20, Pg. ID 694);
12

 Rite Way and Marx share the same headquarters in Sterling Heights
and a storage yard in Rochester Hills (see Zapczynski Dep. at 21-26;
Pg. ID 276-77);
 Rite Way and Marx use the same employees and, in particular, use the
same foremen to supervise their projects (see Grundner Dep., ECF
#36-24 at 21, 28; Pg. ID 695-96; see also “Payroll Audits,” ECF #3627 and #36-28);
 Rite Way and Marx share the same vehicles and equipment (see id. at
29-30, Pg. ID 697);
 Rite Way and Marx use the same accounting, tax, and legal
professionals (see ECF #36-42 through #36-52);
 Marx makes substantial payments to Rite Way for “operational” and
“administrative” costs (see ECF #36-36, #36-37, and #36-38);
 Rite Way pays Marx “management fees” (see ECF #36-40); and
 Rite Way appears to transfers a substantial amount of work to Marx in
the form of subcontracts but the companies do not memorialize these
transactions in written documents (see, e.g., ECF #36-37 at 6, Pg. ID
1325; see also Zapczynski Dep. at 42, Pg. ID 281).
Plaintiffs also argue that Zapczynski and Grundner never intended for Rite Way
and Marx to operate as distinct entities. (See Mot. at 9, Pg. ID 230.) Rather,
Plaintiffs note that as Zapczynski admitted, he and Grundner incorporated Marx
solely because they wanted to bid on Michigan Department of Transportation
(“MDOT”) projects and Rite Way did not satisfy certain MDOT eligibility criteria.
(See Zapczynski Tr. at 26-27, Pg. ID 277.) Plaintiffs contend that these facts
demonstrate that Rite Way and Marx satisfy the Fullerton test for alter ego status.

13

Rite Way and Marx counter that Plaintiffs have not demonstrated that they
are alter egos. Rite Way and Marx insist that their prior admission of alter ego
status was solely “for the purposes of th[at] case” and, accordingly, has no bearing
on this action. (See Resp. Br., ECF #45 at 11, Pg. ID 1795.) Rite Way and Marx
also point out that they maintain separate checking accounts, file separate tax
returns, prepare separate financial statements, and maintain separate payrolls. (Id.
at 10, Pg. ID 1796.) Rite Way and Marx argue that although they shared some
employees, each shared employee (1) was paid by the company on whose project
the employee was working, and (2) received separate W-2 tax statements from Rite
Way and Marx. (See id. at 10-11, Pg. ID 1796-97.) Further, the companies argue
that there is no evidence that Zapczynski and/or Grundner created Rite Way and
Marx as separate corporate entities in order to evade the obligations of a collective
bargaining agreement, and that the absence of such evidence precludes a finding of
alter ego status. (See id. at 21, Pg. ID 1805.)
Even when viewing the evidence in the light most favorable to Rite Way and
Marx, Plaintiffs have established that Rite Way and Marx are alter egos. The
companies’ admission of alter ego status in 2010 is not dispositive here, but it
certainly weighs in favor of the Court finding that the companies are alter egos.
Indeed, Plaintiffs have not pointed to any changes in circumstances from 2010 to
the present that would render obsolete Plaintiffs’ prior admission that the two
14

companies were alter egos of one another and constituted a single employer. More
importantly, even when taken in the light most favorable to Rite Way and Marx,
the evidence in the record demonstrates that Rite Way and Marx have substantially
identical management, business, purpose, operation, equipment, supervision, and
ownership.3 Although Rite Way and Marx correctly point out that there is no
evidence that the companies were created as separate entities in order to avoid
ERISA obligations, “[e]vidence, or lack thereof, of an employer’s intent to evade
the obligations of a collective bargaining agreement is merely one … factor[] to be
considered and is not a prerequisite to the imposition of alter-ego status.” Road
Sprinkler Fitters Local Union No. 669 v. Dorn Sprinkler Co., 669 F.3d 790, 794
(6th Cir. 2012).

Moreover, the companies’ separate checking accounts, tax

statements, and payroll are insufficient to overcome the many indicia of alter ego

3

Plaintiffs argue that Rite Way and Marx also have substantially identical
customers. Plaintiffs submitted voluminous and barely-legible customer lists in
support of this argument. (See ECF #36-31 and #36-32.) The Court cannot
conclude, on the basis of these exhibits, that the companies’ customers were
substantially identical. Nonetheless, the companies have admitted “a degree of
commonality” in their customers. (See Response Br. at 11, Pg. ID 1795.)
Furthermore, “no one element [is] a prerequisite to imposition of alter ego status,”
Allcoast Transfer, 780 F.2d at 582, and under all the relevant factors, considered
together, Rite Way and Marx are alter egos.
15

status. Accordingly, Rite Way and Marx are deemed to be alter egos and will be
jointly and severally liable for all of Plaintiffs’ damages in this action.4
4. Plaintiffs Are Not Entitled to Summary Judgment on Zapczynski’s and
Grundner’s Personal Liability
“[T]here is a presumption that a corporation is a separate entity from its
shareholders.” Laborers’ Pension Trust Fund v. Sidney Weinberger Homes, Inc.,
872 F.2d 702, 704 (6th Cir. 1988.) Therefore, shareholders ordinarily are not
liable for the debts of the corporation. See, e.g., Olympic Forest Prods., Ltd. V.
Cooper, 148 Fed. App’x 260, 263 (6th Cir. 2005) (applying Michigan law).
However, a court may pierce the corporate veil and hold shareholders personally
liable “if there are substantial reasons for doing so after weighing (1) the amount of
respect given to the separate entity of the corporation by its shareholders; (2) the
degree of injustice visited on the litigants by recognition of the corporate entity;
and (3) the fraudulent intent of the incorporators.” Weinberger Homes, 872 F.2d at
704 (internal punctuation and citation omitted). “Factors to be considered include
undercapitalization of the corporation, the maintenance of separate books, the
separation of corporate and individual finances, the use of the corporation to
support fraud or illegality, the honoring of corporate formalities, and whether the
corporation is merely a sham.” Id. at 705 (internal citation omitted).

4

Because the Court deems Rite Way and Marx to be alter egos, the Court need not
address Plaintiffs’ alternative argument that Rite Way and Marx are single and/or
joint employers.
16

Plaintiffs argue that there is substantial reason to hold Zapczynski and
Grundner personally liable for the debts of Rite Way and Marx. Specifically,
Plaintiffs contend that:
 Rite Way and Marx were undercapitalized when they were founded
in 1993 and 2005, respectively (see Mot. at 8, Pg. ID 229);
 Rite Way and Marx have no corporate directors, no bylaws, and no
stock certificates (see id. at 9, Pg. ID 230);
 Rite Way and Marx have never held any shareholder, officer, or
director meetings (see id.);
 Rite Way has made large, unexplained payments to Zapczynski and
has paid approximately $1.6 million toward Zapczynski’s personal
credit card account (see Mot. at 14, Pg. ID 235); and
 Zapczynski regularly transfers money to Rite Way and/or Marx. (See
id. at 14-15, Pg. ID 235-36.)
Plaintiffs argue that failure to pierce the corporate veil under these circumstances
would be unjust because Plaintiffs are obligated to pay certain benefits to their
beneficiaries regardless of whether Rite Way and Marx make their required
contributions. (See id. at 24, Pg. ID 245.)
Zapczynski and Grundner counter that piercing the corporate veil is
unwarranted. They note that Rite Way and Marx each maintained books and
records separate from their shareholders. (See, e.g., see ECF #45-18 through #4524.)

Zapczynski and Grundner further contend that Rite Way’s allegedly-

unexplained payments to Zapczynski and its payments on Zapczynski’s credit card

17

were reimbursements for legitimate business expenses.
Deposition Part II, ECF #36-4 at 162-63, Pg. ID 335-36.)

(See Zapczynski
Zapczynski and

Grundner also argue that Plaintiffs have not shown that they had fraudulent intent.
(See Resp. Br. at 23, Pg. ID 1807.) To the contrary, Zapczynski and Grundner note
that Rite Way and Marx were both signatories to the Agreements and paid
significant contributions to Plaintiffs pursuant to those Agreements. (See, e.g.,
ECF #45-21 at 15, Pg. ID 1949 (reflecting payments to employee benefit plans)
and ECF #36-25 and #36-26 (signature pages to Agreements).)
Viewing the evidence in the light most favorable to Zapczynski and
Grundner, the Court does not find substantial reasons for piercing the corporate
veil as a matter of law. Although Rite Way and Marx may have lacked certain
corporate formalities, when viewed in favor of Zapczynski and Grundner, the
evidence does not show that they so disrespected the separate entities of the
corporations as to warrant veil piercing as a matter of law. Among other things,
there are genuine issues of fact as to Plaintiffs’ allegations that Zapczynski
inappropriately commingled personal and corporate funds. Moreover, Plaintiffs
have not shown that they would suffer injustice from recognition of the corporate
entities for two reasons. First, although Plaintiffs allege that Rite Way and Marx
were undercapitalized at the time of their formation, that allegation is not
supported by the record when viewed in the light most favorable to Zapczynski and
18

Grundner. Indeed, Zapczynski testified that Rite Way and Marx had few assets
when they were formed, but there is no evidence that at that time the companies’
liabilities exceeded their assets – or, indeed, that the companies had any liabilities
at all. (See Zapczynski Dep. at 37-38, Pg. ID 280.) Second, even if Rite Way and
Marx had been undercapitalized at the time of their formation, Plaintiffs have cited
no evidence that Rite Way and Marx currently lack the funds to make them
whole.5 To the contrary, the most current financial statements in the record before
the Court appear to indicate that the companies have positive net equity. (See ECF
#36-40 and #36-41.) The evidence, viewed in Defendants’ favor, also fails to
establish that Zapczynski and/or Grundner had any fraudulent intent.6
Accordingly, Plaintiffs are not entitled to summary judgment as to Zapczynski’s
and Grundner’s personal liability.

5

At oral argument, Plaintiffs’ alleged that Rite Way and Marx have told Plaintiffs
that they intend to file for bankruptcy. However, Plaintiffs have not cited any
evidence that Rite Way and Marx are preparing to enter bankruptcy or are
otherwise uncollectible.
6

The Court notes that the case for Grundner’s personal liability, when the
evidence is viewed in his favor, is exceptionally weak given that (1) Plaintiffs have
not alleged that he commingled personal and corporate funds, and (2) it appears
that Grundner did not play a significant role in the management of Rite Way.
Plaintiffs candidly acknowledged the comparative weakness of the claim against
Grundner at oral argument.
19

CONCLUSION
For all of the reasons explained above, IT IS HEREBY ORDERED that
Plaintiffs’ Motion for Summary Judgment (ECF #36) is GRANTED IN PART
and DENIED IN PART. The Motion is GRANTED to the extent that Plaintiffs’
are entitled to judgment against Rite Way and Marx, jointly and severally, in the
amount of $131,126.22. In addition, Rite Way and Marx shall be jointly and
severally liable for any additional damages that Plaintiffs establish in this action.
The Motion is DENIED in all other respects.
IT IS SO ORDERED.
s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE
Dated: April 24, 2015

I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on April 24, 2015, by electronic means and/or ordinary
mail.
s/Holly A. Monda
Case Manager
[phone]

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