Seipel et al v. Envirotech Remediation Services, Inc.
Filing
213
MEMROANDUM OPINION AND ORDER. IT IS HEREBY ORDERED the Defendant Lindstrom Cleaning & Construction Inc. d/b/a Lindstrom Restoration and Lindstrom Environmental, Inc.'s Motion for Summary Judgment 122 is DENIED. (Written Opinion). Signed by Chief Judge Michael J. Davis on 7/1/11. (GRR)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Gary Reed and Tom Vevea,
as Trustees of the Minnesota
Laborers Health and Welfare
Fund et al.,
Plaintiffs,
v.
MEMORANDUM OPINION
AND ORDER
Civil No. 09‐1976
EnviroTech Remediation Services, Inc.
And Lindstrom Cleaning & Construction
Inc. d/b/a Lindstrom Restoration and
Lindstrom Environmental, Inc.
Defendants.
__________________________________________________________________
Pamela Hodges Nissen and Natalie W. Kohner, Anderson, Helgen, Davis
& Nissen, P.A. and William K. Ecklund and Ruth S. Marcott, Felhaber, Larson,
Fenlon & Vogt, P.A., Counsel for Plaintiffs.
Timothy A. Sullivan, Sarah E. Crippen and Elizabeth C. Borer, Best &
Flanagan LLP, Counsel for Defendant Lindstrom Cleaning & Construction, Inc.
___________________________________________________________________
I.
Introduction
Plaintiff Trust Funds (the “Funds”) brought this action seeking unpaid
employee benefit contributions from EnviroTech Remediation Services, Inc.
1
(“EnviroTech”).1 The Funds later added Lindstrom Cleaning & Construction,
Inc. d/b/a Lindstrom Restoration and Lindstrom Environmental, Inc.
(“Lindstrom”) as a defendant, claiming that Lindstrom is the alter ego or
successor in interest to EnviroTech.
Lindstrom asserts that it is entitled to summary judgment because it did
not sign a collective bargaining agreement with the laborer’s union, and because
successor or alter ego liability does not attach to Lindstrom concerning any
delinquent employee benefit contributions in this case.
II.
Factual Background
A.
EnviroTech
EnviroTech was incorporated in 2001 to provide remediation services to
property owners. (4th Sobaski Aff., Ex. C.) These services include the removal of
asbestos prior to renovation or demolition. Property owners in need of such
services will work with industrial hygienist consultants and the industry, and its
procedures are regulated by the Minnesota Pollution Control Agency (“MPCA”).
Both union and non‐union workers perform this work. EnviroTech joined the
1
The Funds were granted partial summary judgment against EnviroTech in the amount
of $184,000 as to Count I of the Amended Complaint.
2
Minnesota Environmental Contractors Association (“MECA”) in 2002, and
thereby agreed to be bound by the provisions of the relevant collective
bargaining agreement (“CBA”) between MECA and the Asbestos Workers Local
205 and Minnesota Laborers District Council. (Borer Aff., Ex. A.)
Ownership of EnviroTech shares was divided as follows: Brent Krause,
42.51%; William Sievers, 35.48%; Dan Krause, 14.17%; Brent Anderson, 2.93%;
David Sobaski, 4.22%; Jeffrey Dahl, .23%; Don Bent, .23%; and Ted Pladson, .23%.
(1st Sobaski Aff. ¶ 4.) David Sobaski was the President of EnviroTech until
August 2009. (4th Sobaski Aff. ¶ 6.)
EnviroTech began experiencing financial troubles in 2008. (4th Sobaski
Aff. ¶ 8.) In November 2008, Sievers talked with Sobaski about the financial
troubles the company was experiencing, and told him that he was going to
recommend shutting the company down and ceasing operations. (Id. ¶ 8.) After
discussion, they decided to keep the company operating long enough to complete
work on contracts that had already been executed. (Id.) Sobaski offered to
forego receiving a salary, and for two months in late 2008 and early 2009, he did
not receive a salary. (Id. ¶ 9.) When he was put back on the payroll, his annual
salary was cut from $120,000 to $70,000. (Id.)
3
At the end of 2008, it became clear to Sobaski that he would not have a job
for much longer at EnviroTech, so he began to look for another position. (Id. ¶
10.) In the meantime, EnviroTech worked with Sealed Bid Marketing to sell the
business. (Id. ¶ 11.) EnviroTech’s banker, Mitch Joyce from Central Bank,
thought the Sealed Bid estimate for the company, $2 million, was optimistic as it
was his opinion the company had no worth by the end of 2008. (Borer Aff., Ex. B
(Joyce Dep. at 40).)
By July 2009, the only prospective buyer was a Michigan company owned
by an individual named Art Dore, who bid $827,000 for Envirotech. (Id., Ex. G.)
Certain EnviroTech employees, however, had concerns about selling the
company to Dore, such as whether they would be offered jobs with the new
company and subject to non‐competition agreements. (Id. ¶ 13.) At some point,
Jerry Clark from Sealed Bid was told by Sievers that the sale to Dore would not
happen as Sievers had doubts about Dore being “to [sic] tough” and that Dore
may take advantage of Sievers. (Borer Aff., Ex. C.) A Preliminary Liquidation
Analysis done in August 2009 valued EnviroTech’s inventory at $167,450 and a
fixed asset liquidation at $32,616. (Id., Ex. D.)
4
B.
Lindstrom
Lindstrom Cleaning & Construction has been in business since 1945, but
prior to August 2009, the company did not perform environmental remediation
services. (Id., Ex. E (Lindstrom Dep. at 7); 4th Sobaski Aff., Ex. B.) At some time
in and around early 2009, Lindstrom was considering whether to open an
environmental remediation division that would offer the same services as
EnviroTech, and was interested in talking with Sobaski about a possible position
with Lindstrom, given Sobaski’s experience in the environmental remediation
business. (4th Sobaski Aff.,¶ 14; Borer Aff., Ex. E (Lindstrom Dep. at 7).) In
February 2009, Sobaski did talk with Les MacLeod, a sales person at Lindstrom,
but at that time, Sobaski was committed to EnviroTech. By July 2009, however,
Sobaski again contacted MacLeod about the possibility of employment given the
likelihood that EnviroTech would not continue in business. (4th Sobaski Aff. ¶
15.) Sobaski later met with MacLeod and Kevin Grady of Lindstrom to discuss
this opportunity further. (Id.)
On August 10, 2009, Sobaski began work as President of Lindstrom
Environmental. (Id. ¶ 17; Doc. No. 140, Ex. 4.) Sobaski, in turn, told EnviroTech
employees Jeff Dahl, Jim Moeller and Jennifer Hilsgen about Lindstrom starting
5
an environmental services division, and that he would need help to build that
division for Lindstrom. (Id. ¶ 19.) These employees applied for positions with
Lindstrom, and were eventually hired. (Id.) Dahl and Moeller serve as a
Estimator/Project Managers for Lindstrom Environment, Don Bentz2 serves as
Controller, and Hilsgen as Officer Manager. (Kohner Aff. [Doc. No. 140] Ex. 4.)
By August 15, 2009, Sobaski, Hilsgen, Dahl and Moeller appear on Lindstrom
Environmental payroll records. (Id. Ex. 5.) Many field workers that previously
worked for EnviroTech have been hired for particular jobs by Lindstrom. (4th
Sobaski Aff., Exs. K and L; Carlson Aff., Ex. 2.)
C.
Facts Relevant to Whether Lindstrom Continued EnviroTech’s
Business
When Lindstrom began its environmental services division, it rented office
and warehouse space from EnviroTech for a period of three months. (4th Sobaski
Aff. ¶ 25, Ex. H.) Thereafter, Lindstrom prepared its own office space in a
separate location. (Id.) At about the time Lindstrom was starting up its
environmental services division, Sobaski learned that Central Bank was planning
2
Lindstrom stresses that Don Bentz provided accounting and financial services for
EnviroTech as an independent contractor, and serves as a consultant for Lindstrom
Environmental. (Id. ¶ 21; Borer Aff., Ex. E (Lindstrom Dep. at 16).) Bentz is nonetheless
identified as Lindstrom Environmental’s Controller on its website. (Kohner Aff., [Doc. 140], Ex.
4.)
6
on liquidating EnviroTech’s assets. Sobaski, on behalf of Lindstrom, negotiated
with Sievers, on behalf of EnviroTech, about the price of equipment. (Id. ¶ 23.)
Eventually, Central Bank and Sievers agreed to sell the equipment to Lindstrom
for $175,000. (Id.) The asset purchase was completed on August 25, 2009. (Borer
Aff., Ex. G.) Lindstrom did not assume any of EnviroTech’s liabilities. (Id.) Nor
did Lindstrom purchase EnviroTech’s accounts receivables. (Id., Ex. B (Joyce
Dep. at 45).)
Prior to the asset sale to Lindstrom, Ted Pladson, the former Operations
Manager of EnviroTech, submitted a bid on behalf of EnviroTech for a project in
Minneapolis concerning a building owned by Aeon Corporation. (4th Sobaski
Aff. ¶ 31; Borer Aff., Ex. F (Minnesota Department of Health Notification of Lead
Hazard dated August 7, 2009).) The bid was in the amount of $56,880. (Nissen
Aff., Ex. E (Pladson Dep. Ex. 12).) Soon thereafter, EnviroTech learned that it
was the successful bidder on the project. Pladson sent an email to Rosemary
Dolata, the Aeon project manager, informing her of Lindstrom Restoration. (Id.,
Ex. G) At his deposition, Pladson testified that he wrote the email to inform
Dolata “we were going to be Lindstrom now.” (Id. Ex. A (Pladson Dep. at 65).)
Pladson sent Dolata another email on August 11, 2009, to let her know “Our new
7
name and address” and thereafter listed Lindstrom’s address. (Id. at 66‐67, Ex.
15.)
Sometime later, Sobaski sent Dolata information clarifying that Lindstrom
did not merge with EnviroTech, that Lindstrom had purchased EnviroTech’s
assets, but not EnviroTech’s name and that EnviroTech remained an active
company. (Borer Aff., Ex. H.) It was determined that EnviroTech would
maintain the project, but subcontract the work through Lindstrom
Environmental. (Id. Ex. J.)
There is also evidence that Lindstrom Environmental may have completed
another job started by EnviroTech. The Daily Site Logs for the project at Fairview
Riverside Medical Center to Lindstrom appear to reveal a complete continuity of
work between EnviroTech and Lindstrom. (Skoog Aff., Ex. K.)
The Funds assert that there is also evidence in the record which suggests
some overlap of work performed by EnviroTech employees that went to work for
Lindstrom. For example, prior to his start date at Lindstrom, Sobaski may have
sold several projects for Lindstrom before he started working for Lindstrom.
(Nissen Aff., Ex. Q (Lindstrom Dep. at 52‐53).) There is also evidence which
suggests that other former EnviroTech employees continued to perform work for
8
EnviroTech even after they began to work for Lindstrom. For example, in
September 2009, Hilsgen, after she began working for Lindstrom, emailed Sievers
the EnviroTech Job Current Aging Report which is dated 09/21/09. (Skoog Aff.,
Ex. J (Bates No. SIEVERS No. 00091‐00092).) She also emailed EnviroTech
customer Bobosdzenski and Sons, Inc., providing that company a current
certified payroll from EnviroTech relating to a project EnviroTech completed for
that firm. (Id. (Bates No. SIEVERS No. 00067‐00068).) In an email dated October
16, 2009, Hilsgen wrote to Sievers asking “is it okay to mail the utility bills we
went over last week?” (Id. (Bates No. SIEVERS No. 00071).) These and other
emails found in the record (Skoog Aff., Ex. J) would indicate that both Sobaski
and Hilsgen continued to have access to the electronic and physical files of
EnviroTech and that they continued to be involved in working on files for
EnviroTech for months after EnviroTech allegedly ceased doing business.
Finally, Lindstrom Environmental uses the same bank as EnviroTech and
the same insurance company. (Skoog Aff., Ex. A). The Funds assert that these
facts further suggest a continuity of business between EnviroTech and
Lindstrom.
9
D.
Lindstrom Environmental Earnings through December 31, 2010
Lindstrom Environmental’s total sales through December 31, 2010 was
$5,670,243. Of that amount, Lindstrom asserts that $1,293,714 was from
customers who had done business with EnviroTech, $1,033,847 of which was
from contracts that Lindstrom obtained through the competitive bidding process.
Thus, only $259,867 of Lindstrom’s total sales were from jobs that originated
through EnviroTech; $66,209 was for the Aeon project subcontracted from
EnviroTech. (4th Sobaski Aff. ¶¶ 27‐30.)
E.
National Labor Relations Board (“NLRB”) Findings
In December 2009, the Fund issued a letter to former EnviroTech
employees, some of whom went to work for Lindstrom, informing of plan
changes effective January 10, 2010. With regard to banked hours that could be
used to preserve health care coverage, the Fund stated that “hours credited to an
Active Laborer’s Hour Bank will be forfeited” should the workers perform work
for an employer not covered by a collective bargaining agreement. (Borer Aff.,
Ex. M.)
One former EnviroTech employee filed an unfair labor charge with the
NLRB naming EnviroTech as respondent and claiming that EnviroTech closed its
10
union operations and re‐opened as a non‐union company. (Id., Ex. N.) The
charge alleged EnviroTech created an alter ego (Lindstrom) in order to avoid its
union obligations. (Id.) The NLRB dismissed the charge in February 2010,
concluding that there was insufficient evidence of a violation of the NLRA by
EnviroTech. (Id., Ex. P.)
On February 23, 2010, Rod Skoog, the Fund Administrator, sent a letter to
Dean Bennett, a former EnviroTech employee and union member who was hired
by Lindstrom. Skoog informed Bennett that because he was performing work for
Lindstrom, “who does not have and [sic] obligation to remit contributions to the
Fund”, his banked hours were forfeited. (Id., Ex. Q.)
III.
Standard for Summary Judgment
Summary judgment is appropriate if, viewing all facts in the light most
favorable to the non‐moving party, there is no genuine issue as to any material
fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56 (c); Celotex Corp. v. Catrett, 477 U.S. 317, 322‐23 (1986). The party seeking
summary judgment bears the burden of showing that there is no disputed issue
of material fact. Celotex, 477 U.S. at 323. This burden can be met “by ‘showing’ ‐
that is, pointing out to the district court ‐ that there is an absence of evidence to
11
support the nonmoving party’s case.” Id. at 325. The party opposing summary
judgment may not rest upon mere allegations or denials, but must set forth
specific facts showing that there is a genuine issue for trial. Krenik v. County of
Le Sueur, 47 F.3d 953, 957 (8th Cir.1995).
IV.
Analysis
A.
No Written Agreement
Lindstrom first argues that federal law requires that with respect to money
or other thing of value to be paid to a trust fund established for the sole benefit of
employees, “the detailed basis upon which such payments are to be made “ must
be “specified in a written agreement with the employer . . . “ 29 U.S.C. § 186
(c)(5)(B)(2010). Lindstrom has never entered into a written agreement with its
employees or a labor organization representing its employees.
Where there is no collective bargaining agreement between an employer
and union specifying the basis upon which trust payments would be made, there
is no valid trust and any payments by the employer are prohibited. Moglia v.
Geoghegan, 403 F.2d 110, 117 (2d Cir. 1968) cert. denied 394 U.S. 919 (1969);
Robbins v. Main Line Hauling Col., Inc., 590 F. Supp. 1050, 1053‐54 (E.D. Mo.
1984). Non union employers could contribute to union fringe funds as long as
12
there is a separate agreement between the fund and any participating non union
employer. Seafood Workers Health Fund Union Trustees v. Seafood Workers
Health Fund Mgmt. Trustees, 571 F. Supp. 483, 487 (D. Mass. 1983).
However, a non‐signatory employer may be liable for a predecessor’s
contractual obligations, where the former is the alter ego of the latter. See, e.g.,
Brady v. Borchart Indus., Inc., Civil No. 05‐1386, 2006 WL 3043138 (D. Minn. Oct.
25, 2006) (based on alter ego argument, court denied company summary
judgment where two companies were wholly‐owned by same individual and
engaged in same type of salvage products); Brady v. Swenke, Civil No. 03‐6381,
2004 WL 2697282 (D. Minn. Nov. 24, 2004). Liability for delinquent employee
benefit contributions may also attach to a successor corporation, under certain
circumstances. See Einhorn v. M.L. Ruberton Const. Co., 632 F.3d 89 (3d Cir.
2011). Thus, lack of a written agreement between the Funds and Lindstrom, in
and of itself, is not determinative of whether Lindstrom is liable for any
delinquent contributions to the Funds.
B.
Alter Ego
The Funds argue that Lindstrom is liable for any unpaid fringe benefit
contributions as Lindstrom is the alter ego of EnviroTech. The alter ego doctrine
13
provides that “the legal fiction of the separate corporate identity may be rejected
in the case of a corporation that (1) is controlled by another to the extent that it
has independence in form only and (2) is used as a subterfuge to defeat public
convenience.” Kansas City Laborers Pension Fund v. Superior Gen. Contractors,
Inc., 104 F.3d 1050, 1055 (8th Cir. 1997). In Superior Gen., the Eighth Circuit held
that the alter ego doctrine as developed under the NLRA involves a more lenient
standard for disregarding corporate form than that employed by corporate law,
and that in ERISA cases, the corporate law of alter ego doctrine is appropriately
applied. Id., 104 F.3d at 1055. See also Minn. Laborers’ Health and Welfare v.
Scanlan, 360 F.3d 925, 927‐28 (8th Cir. 2004).
The Court finds that the record is clear that Lindstrom is not the alter ego
of EnviroTech. There is no dispute that Lindstrom was a pre‐existing
corporation, and that Lindstrom Environmental was incorporated in 2009 to
perform lead and asbestos remediation services. There is no shared ownership of
EnviroTech and Lindstrom stock, and there is no evidence that Lindstrom failed
to follow corporate formalities. Sobaski is the only officer of EnviroTech that is
now an officer at Lindstrom Environmental. While Sobaski did own a minority
share of EnviroTech stock, there is no evidence that he owns any Lindstrom
14
stock. The two companies have separate accounting books, bank accounts, and
insurance policies. In sum, there is no evidence that EnviroTech controls any
aspect of Lindstrom Environmental.
The Court further finds that the Funds have offered no evidence that
Lindstrom Environmental acted with an unlawful intent or motive. “[T]he focus
of the alter ego doctrine . . . is on the existence of a disguised continuance of a
former business entity or an attempt to avoid the obligations of a collective
bargaining agreement, such as through a sham transfer of assets.” Iowa Express
Distrib., Inc. v. Nat’l Labor Rel. Bd., 739 F.2d 1305, 1311 (8th Cir. 1984). The
Funds have offered no evidence that Lindstrom Environmental was created for
the purpose of avoiding the union or that the asset sale was a sham transaction.
Rather, the evidence suggests that Lindstrom saw a business opportunity with
the demise of EnviroTech and formed a new corporation to take advantage of the
opportunity. Lindstrom purchased EnviroTech’s assets with its own financing
and has its own operating capital and insurance. Accordingly, the Court finds
that Lindstrom Environmental is not the alter ego of EnviroTech.
C.
Successor Liability
The Funds argue that Lindstrom may nonetheless be liable for unpaid
15
employee fringe benefit contributions under the theory of successor liability.
Accordingly, this case presents the issue of whether a purchaser of assets may be
held liable under ERISA for delinquent employee contributions under a theory of
successor liability. This issue has not yet been addressed by the Eighth Circuit,
but several federal courts in other jurisdictions have found that a purchaser of
assets may be liable for a seller’s delinquent ERISA fund contributions if the
purchaser had notice of the liability prior to the sale and there exists sufficient
evidence of continuity of operations between the buyer and the seller. Einhorn,
632 F.3d at 99; Stotter Div. of Graduate Plastics Co., Inc. v. Dist. 65, 991 F.2d 997,
1002 (2d Cir. 1993); Upholsterers’ Union Pension Fund v. Artistic Furniture, 920
F.2d 1323, 1327 (7th Cir. 1990). See also Bd of Trustees of Unite Here Local 25 v.
MR Watergate LLC, 677 F. Supp.2d 229, 231 (D.D.C. 2010) (applying nine‐part
test to determine whether purchaser of assets is a successor, subject to successor
liability analysis to determine withdrawal liability).
Lindstrom argues that these cases are not controlling because the Eighth
Circuit has held that liability for unpaid fringe benefit contributions under ERISA
arises only under the alter ego doctrine, citing the decision in Superior Gen., 104
F.3d at 1055. As noted by the court in Einhorn, however, the Eighth Circuit’s
16
decision in Superior Gen. Contractors is not “persuasive or relevant authority . . .
[as the] case did not involve an asset sale and [the] issue was whether defendant
was an alter ego.” Einhorn, 632 F.3d at 99, n. 10. Because this case involves an
asset sale only, and the issue is successor liability, Superior Gen. is not controlling
on this issue.
Further, the bases for the decisions set forth in Einhorn and Artistic
Furniture are otherwise consistent with Eighth Circuit precedent. For example,
in Einhorn, the court held that the federal common law successorship doctrine,
beginning with Golden State Bottling Co. v. NLRB, 414 U.S. 168 (1973), applied to
actions seeking recovery of delinquent pension fund contributions under ERISA.
Einhorn, 632 F.3d at 99. In Golden State, the Supreme Court held that a
purchaser of a business could be held liable under the National Labor Relations
Act for remedying the seller’s unlawful discharge of an employee, where the
successor employer had notice of the unfair practice and continued without
interruption or substantial change the predecessor’s business operations. 414
U.S. at 184‐85. In so finding, the Court recognized that it must strike a balance
between the conflicting legitimate interests of the bona fide successor, the public
and the affected employees. Id. at 181. Ultimately, the Court held that “[s]ince
17
the successor must have notice before liability can be imposed, ‘his potential
liability for remedying the unfair labor practices is a matter which can be
reflected in the price he pays for the business, or he may secure an indemnity
clause in the sales contract which will indemnify him for liability arising from the
sellerʹs unfair labor practices.’” Id. at 185 (quoting Perma Vinyl Corp., 164
N.L.R.B. 968, 969 (1967)).
While Golden State arose in the labor law context, the court in Einhorn
recognized that numerous courts had extended its reasoning when necessary to
protect important employment‐related policies. Id. 632 F.3d at 95 (citing
Brozozowski v. Corr. Physician Servs., Inc., 360 F.3d 173, 177 (3d Cir. 2004)
(extending Golden State to Title VII claims)). The court thereafter held that “the
federal policies underlying ERISA and the Multiemployer Pension Plan
Amendments Act of 1980 (“MPPAA”), Pub.L. 96–364, 94 Stat. 1208, ‘are no less
important, and no less compel the imposition of successor liability than do the
policies animating the NLRA, Title VII,’ or the other statutes to which the
doctrine has been extended.” Id. (quoting Artistic Furniture, 920 F.2d at 1327).
While the Eighth Circuit has not yet extended the “expanded” successor
liability set forth in Golden State to an action arising under ERISA, it has done so
18
in actions arising under CERCLA, United States v. Mexico Feed and Seed Co.,
Inc., 980 F.2d 478, 488 (8th Cir. 1992) (adopting the “substantial continuation” test
because under the traditional successor liability test, responsible parties could
easily escape liability for the creation or maintenance of hazardous waste by a
predecessor corporation), and under Title VII. Dominguez v. Hotel, Motel,
Restaurant & Misc. Bartenders, 674 F.2d 732, 733 (8th Cir. 1982). See also Korlin
v. Chartwell Health Care, Inc., 128 F. Supp. 2d 609 (E.D. Mo. 2001) (ADEA claim);
EEOC v. Am. Cyanamid Co., No. 2:01CV110MLM, 2002 WL 31505551 (E.D. Mo.
Oct. 8, 2002) (ADA claim). This Court further notes that no court of appeals has
yet to reject the Einhorn or Artistic Furniture line of cases.
This Court finds the Einhorn and Artistic Furniture decisions, applying an
expanded successor liability test to determine whether a successor corporation is
liable for delinquent employee benefit contributions, to be persuasive.
Accordingly, to determine whether Lindstrom is liable for any delinquent
employee benefit contributions, the Funds must show that Lindstrom had
knowledge of EnviroTech’s contractual obligations to contribute to the Funds,
and that EnviroTech was liable for delinquent contributions, and that there exists
sufficient evidence of continuity of operations between the buyer and the seller.
19
1.
Substantial Continuity of Business
A corporate successor is one where there is a “substantial continuity of
identity in the business enterprise.” Howard Johnson Co. v. Hotel & Restaurant
Employees, Detroit Local Joint Exec. Bd., 417 U.S. 249, 263 (1974). To determine
whether there is a continuity of business identity, the Court must find the
following: 1) whether there has been a substantial continuity of the same business
operation; 2) the new employer uses the same plant; 3) a majority of the new
workforce is made up of the predecessor’s employees; 4) the same jobs exist
under the same working conditions; 5) the same supervisors are employed; 6) the
same machinery, equipment and methods of production are used; and 7) the
product is manufactured or the same services are offered. 3750 Orange Place Ltd.
P’ship v. Nat’l Labor Relations Bd., 333 F.3d 646, 655 (6th Cir. 2003) (citing Fall
River Dyeing & Finishing Corp. v. N.L.R.B., 482 U.S. 27, 43 (1987)). The Court
must consider the above under the totality of the circumstances, no one factor is
determinative. Id.
On the record currently before the Court, there appears to be fact questions
as to whether Lindstrom is continuing the same business enterprise as
EnviroTech. Many of EnviroTech’s employees obtained employment with
20
Lindstrom Environmental, including the President of EnviroTech, Sobaski, and
much of the office staff. Further, there is evidence to suggest the Lindstrom
completed projects started by EnviroTech. It thus appears that Lindstrom
Environmental provides the same services as EnviroTech, and there is some
evidence that corporate resources were co‐mingled through at least February
2010.
There is also a fact question as to whether Lindstrom Environmental
purchased EnviroTech’s assets after an arms length negotiation. EnviroTech
argues that the Dore proposal valued the equipment at $250,000. (4th Sobaski
Aff., Ex. G.) The cost of the equipment at issue was $688,554.92. (Nissen Aff., Ex.
R.) It is EnviroTech’s position that the final purchase price of $175,000 was not
negotiated ‐ Sobaski asked for that amount and Lindstrom agreed, without
having the equipment evaluated. (Id., Ex. Q (Lindstrom Dep. at 24).)
2.
Notice of the Delinquency
The notice prong is satisfied by either actual or constructive knowledge,
and it is satisfied where an employee of the predecessor company who had
knowledge of the pension contribution liability begins employment with the
successor company. See Golden State, 414 U.S. at 173. In this case, Sobaski
21
admitted that he attempted to resolve EnviroTech’s liability prior to the asset
purchase sale on August 25, 2009. (4th Sobaski Aff. ¶ 35.) Sobaski thereafter
became an employee of Lindstrom, in charge of Lindstrom Environmental.
It is unclear, however, what information was actually or constructively passed on
to the decision makers at Lindstrom prior to its purchase of EnviroTech’s assets.
Summary judgment as to successor liability is not warranted on this
record.
IT IS HEREBY ORDERED the Defendant Lindstrom Cleaning &
Construction Inc. d/b/a Lindstrom Restoration and Lindstrom Environmental,
Inc.’s Motion for Summary Judgment [Doc. No. 122] is DENIED.
Date: July 1, 2011
s/ Michael J. Davis
Michael J. Davis
Chief Judge
United States District Court
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