The Board of Trustees et al v. Noorda et al

Filing 74

ORDER denying 48 Motion for Summary Judgment; ORDER denying 63 Motion for Summary Judgment; FURTHER ORDERED that this matter is referred to a magistrate judge for a mandatory settlement conference. Signed by Judge Jennifer A. Dorsey on 3/30/2018. (Copies have been distributed pursuant to the NEF - JM)

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1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 The Board of Trustees, in their capacities as Trustees of the National Roofing Industry Pension Fund, et al., 4 5 Case No.: 2:16-cv-00170-JAD-CWH Order Denying Motions for Summary Judgment Plaintiff 6 v. 7 Lamar and Elise H. Noorda and Foursquare Roofs & Walls, Inc. 8 [ECF Nos. 48, 63] Defendants 9 The trustees of the National Roofing Industry Pension Fund and three other employee- 10 11 benefit funds (the Trusts)1 sue Lamar and Elise Noorda and Foursquare Roofs & Walls, Inc. 12 (Foursquare) to recover unpaid employer contributions that are allegedly owed under a 13 collective-bargaining agreement that non-party Noorda Sheet Metal Company (NSM) entered 14 into with non-party United Union of Roofers Waterproofers and Allied Workers Local 162 15 (Union).2 The Trusts allege that Foursquare is the successor and alter ego of NSM and, thus, is 16 liable in contract for NSM’s failure to pay employer contributions. The Trusts allege that the 17 Noordas, who owned NSM then and partly own Foursquare now, are the alter egos of both 18 entities and, thus, are also liable in contract for some of the unpaid contributions.3 The Noordas and Foursquare now move for summary judgment on all of the Trusts’ 19 20 claims, arguing that the alter-ego and successor-liability claims are barred by the doctrines of 21 issue preclusion and claim preclusion, and the breach-of-contract claim fails as a result.4 The 22 1 The National Roofing Industry Pension Fund National Roofers Union Health 23 and Welfare Fund (Welfare Fund), Roofers and(Pension Fund),Research and Education Joint Waterproofers 24 Trust Fund (Trust Fund), and Roofers Apprentice and Journeyman Training Trust Fund Local 162 for Clark, Esmeralda, Lincoln & Southern Nye Counties (Apprentice Fund). 25 2 ECF No. 1. 26 3 The Trusts also seek equitable remedies like an audit of Foursquare’s books and records and an injunction requiring Foursquare to comply with the terms of the collective bargaining agreement. 27 4 28 ECF No. 48. 1 1 Noordas also argue that the Trusts are enjoined from suing them by virtue of the discharge that 2 they received in their personal Chapter 7 bankruptcy case. The Trusts move for summary 3 judgment on their claim that Foursquare is NSM’s successor.5 I deny the defendants’ motion 4 because their arguments are either wrong or not fully developed, and I deny the Trusts’ motion 5 because triable issues preclude summary judgment on their successor-employer claim. Background6 6 NSM entered into collective-bargaining agreements with the Union in 2007 and 2010. 7 8 When the 2010 agreement expired in 2012, NSM terminated its relationship with the Union, but 9 nine months later entered into a memorandum of understanding that made it a party to a new 10 collective-bargaining agreement, which expired on July 31, 2015. NSM, which fabricated and installed sheet-metal products, was owned and operated by 11 12 the Noordas for two decades. But when the company ran into serious financial difficulty, they 13 shuttered it in December 2013 and put it into bankruptcy the next month. Elise Noorda 14 incorporated Foursquare a few months later. The Noordas also filed personal bankruptcy 15 petitions and received a discharge under Chapter 7 of the Bankruptcy Code in April 2014. Before that discharge was entered, two of the plaintiff trusts in this case7 and the Union 16 17 filed an adversary proceeding under the Noorda’s bankruptcy case, and alleged three claims 18 challenging the dischargeability of the Noorda’s debts arising from NSM’s alleged breach of the 19 collective-bargaining agreement. The adversary proceeding was set for trial, but before that 20 occurred, the Ninth Circuit issued an opinion that eviscerated the adversary plaintiffs’ second 21 claim against the Noordas,8 which was based on the theory that they are ERISA fiduciaries. So, 22 the adversary plaintiffs moved to dismiss their adversary proceeding. The bankruptcy court 23 24 5 ECF No. 63. 6 Unless otherwise stated, this section is undisputed 25 information is provided to the information in should not be construed asby the parties. This give context, and factual findings. 26 7 The Pension Fund and the Welfare Fund. 27 8 Bos v. Board of Trustees, 795 F.3d 1006 (9th Cir. 2015), cert. denied, —U.S.—, 136 S. Ct. 1452 (2016). 28 2 1 granted the motion and dismissed their claims with prejudice under FRCP 41 and FRBP 7041.9 2 The bankruptcy court then entered a judgment of dismissal in favor of the Noordas. Discussion 3 4 A. Summary-judgment standard 5 Summary judgment is appropriate when the pleadings and admissible evidence “show 6 that there is no genuine issue as to any material fact and that the movant is entitled to judgment 7 as a matter of law.”10 When considering summary judgment, the court views all facts and draws 8 all inferences in the light most favorable to the nonmoving party.11 If reasonable minds could 9 differ on material facts, summary judgment is inappropriate because its purpose is to avoid 10 unnecessary trials when the facts are undisputed, and the case must then proceed to the trier of 11 fact.12 If the moving party satisfies Rule 56 of the Federal Rules of Civil Procedure by 12 13 demonstrating the absence of any genuine issue of material fact, the burden shifts to the party 14 resisting summary judgment to “set forth specific facts showing that there is a genuine issue for 15 trial.”13 The nonmoving party “must do more than simply show that there is some metaphysical 16 doubt as to the material facts”; it “must produce specific evidence, through affidavits or 17 admissible discovery material, to show that” there is a sufficient evidentiary basis on which a 18 reasonable fact finder could find in his favor.14 19 20 9 I take judicial notice of the existence and content of the record in the adversary proceeding against the Noordas, In re Lamar Von Noorda and Elsie H. Noorda, Adv. Proc. No. 14-01077 21 (Bankr. D. Nev. Apr. 29, 2014), under FRE 201, but not for the truth of any matter asserted 22 therein. 10 Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986) (citing Fed. R. Civ. P. 56(c)). 23 24 11 Kaiser Cement Corp. v. Fisbach & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986). 12 441 (9th Cir. 1995); see also Nw. Motorcycle Ass’n 25 v. Warren v. City of Carlsbad, 58 F.3d 439,(9th Cir. 1994). U.S. Dept. of Agric., 18 F.3d 1468, 1471 26 13 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Celotex, 477 U.S. at 323. 27 14 Bank of Am. v. Orr, 285 F.3d 764, 783 (9th Cir. 2003) (internal citations omitted); Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991); Anderson, 477 U.S. at 248–49. 28 3 1 B. Defendants’ motion for summary judgment [ECF No. 48] 2 Foursquare and the Noordas argue that they are entitled to summary judgment because 3 the alter-ego and successor-liability claims are barred by the doctrines of issue and claim 4 preclusion, and the Trusts need one of those to stick to hold them liable for NSM’s alleged 5 breach of the collective-bargaining agreement. The Noordas also argue that their debt to the 6 Trusts was discharged under Chapter 7 of the Bankruptcy Code. 7 1. 8 Issue preclusion “bars ‘successive litigation of an issue of fact or law actually litigated Issue preclusion 9 and resolved in a valid court determination essential to the prior judgment,’ even if the issue 10 recurs in the context of a different claim.”15 Defendants argue that whether they are the alter 11 egos of NSM or if Foursquare is a successor employer of NSM are issues that were decided in 12 their favor in the adversary proceeding. It is undisputed that U.S. Bankruptcy Judge August Landis entered an order granting the 13 14 adversary plaintiffs’ motion to dismiss their adversary proceeding against the Noordas with 15 prejudice under FRCP 41 and FRBP 7041. Also undisputed is that Judge Landis then entered a 16 judgment of dismissal in favor of the Noordas. “The preclusive effect of a federal-court 17 judgment is determined by federal common law.”16 The Ninth Circuit has explained that “[a] 18 voluntary dismissal of a claim prior to any adjudication and without any stipulated findings of 19 fact does not actually litigate any issue[,]” even if the dismissal is with prejudice.17 Judge Landis did not adjudicate the merits of successor or alter-ego liability or make any 20 21 stipulated findings of fact when he granted the adversary plaintiffs’ dismissal motion and 22 23 24 15 Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (quoting New Hampshire v. Maine, 532 U.S. 742, 25 748–49 (2001)). 26 16 Id. 27 17 Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1159 (9th Cir. 2002) (collecting cases) (concerning stipulation to dismiss a claim with prejudice). 28 4 1 dismissed that case with prejudice.18 Indeed, when Judge Landis provided the procedural 2 background and alleged facts during his oral ruling on the motion, he was very clear to state on 3 the record that “those are allegations, not findings, only to the extent that they’re findings of fact. 4 It’s just to state that’s what the complaint alleges.”19 The defendants point to no part of the 5 adversary proceeding’s record—and I have not found any—where any issue of fact was 6 adjudicated or stipulated-to by the parties. So, issue preclusion cannot attach to the voluntary 7 with-prejudice dismissal of the adversary claims. 8 2. 9 “Under the doctrine of claim preclusion, a final judgment forecloses ‘successive litigation Claim preclusion 10 of the very same claim, whether or not relitigation of the claim raises the same issues as the 11 earlier suit.’”20 “Claim preclusion applies when there is (1) an identity of claims; (2) a final 12 judgment on the merits; and (3) identity or privity between the parties.”21 The Ninth Circuit 13 explained in Garity v. APWU National Labor Organization that the first factor “is outcome 14 determinative” and depends upon whether the two suits “‘are related to the same set of facts and 15 whether they could conveniently be tried together.’”22 But the defendants don’t mention—let alone analyze—whether the Trusts’ claims in this 16 17 case could conveniently be tried with the claims in the adversary proceeding.23 The prior suit 18 18 re Lamar Von H. Noorda, 19 D.See InMar. 10, 2016) Noorda and Elise Motion and Case No. 14-01007, ECF Nos. 192 (Bankr. Nev. (“Order Granting Dismissing Adversary Proceeding), 220 (“Transcript of Motion to Dismiss Adversary Proceeding . . .”). 20 19 See In re Lamar Von Noorda and Elise H. Noorda, Case No. 14-01007, ECF No. 220 at 7:18– 21 20. 22 20 Taylor, 553 U.S. at 892 (quoting New Hampshire, 532 U.S. at 748). 23 21 Garity v. APWU Nat. Labor Org., 828 F.3d 848, 855 (9th Cir. 2016) (quotation marks and quoted references omitted). 24 22 Id. (quotation marks and quoted references omitted). 25 23 ECF No. 48 at defendants’ argument for why the first factor is met is 26 that “many of the7–8 (The entirety of the the Plaintiffs’ current Complaint were taken verbatim alter ego allegations in in the Adversary Proceeding” 27 from Plaintiffs’ Amended Complaint‘unity of interest’ among NSM,and, “[i]n both cases, “Plaintiffs allege that there is such a Foursquare, and the Noordas that all three should be treated as a single entity.”). 28 5 1 was an adversary proceeding against the Noordas alleging three claims that their debt under the 2 collective bargaining agreement was not dischargeable under 11 U.S.C. §§ 523(a)(2), (4), and 3 (6).24 In this case, the Trusts seek to hold the Noordas liable for NSM’s alleged breach of the 4 collective-bargaining agreement under the theory that they are NSM’s alter egos. And the Trusts 5 seek to hold Foursquare liable for NSM’s alleged breach of the collective-bargaining agreement 6 under the theory that it is NSM’s alter ego and its successor employer. I decline to analyze for 7 the defendants in the first instance whether the claims in this case could have conveniently—or 8 even possibly—been tried by the bankruptcy court in an adversary proceeding challenging the 9 dischargeability of the Noordas’ alleged debt to the Trusts. So, I find that the defendants have 10 not demonstrated that claim preclusion attaches to the with-prejudice dismissal of the 11 dischargeability claims. 12 3. 13 Defendants’ final argument is that the Trusts’ alter-ego claim against them is barred by Discharge injunction 14 the Chapter 7 discharge injunction. There is no dispute that the Noordas received a discharge 15 under Chapter 7 of the Bankruptcy Code. Also undisputed is that their “order for relief” was 16 entered on January 23, 2014.25 Defendants explain that a Chapter 7 discharge “‘discharges the 17 debtor from all debts that arose before the date of the order for relief . . . .’”26 They also explain 18 that “debt” means a “‘liability on a claim’” and “claim” means a “‘right to payment, whether or 19 not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, 20 umnatured, disputed, undisputed, legal, equitable, secured or unsecured.’”27 According to the defendants, the Trusts are seeking to hold the Noordas liable for NSM’s 21 22 “Audit Liability,” which concerns NSM’s failure to pay employer contributions that were owed 23 24 In re Lamar Von Noorda and Elise H. Noorda, Case No. 14-01007, ECF No. 93 (“First Amended Complaint to Determine Certain Debt to be NonDischargeable”) (Bankr. D. Nev. Mar. 24 23, 2015). 25 25 This is the date that they filed their bankruptcy petitions. See In re Ybarra, 424 F.3d 1018, 26 1022 (9th Cir. 2005) (“The filing of a petition under Chapter 7 constitutes an ‘order for relief.’”). 27 28 26 ECF No. 48 at 13 (quoting 11 U.S.C. § 727(b)). 27 Id. (quoting 11 U.S.C. §§ 101(12), 101(5)(A)). 6 1 between 2011–2013. The Trusts respond that isn’t true, and point to paragraph “XLVI” of their 2 complaint, which contends that, after the court declares that Foursquare is the alter ego of NSM, 3 it should declare that the Noordas are the mere shells of Foursquare and hold them individually 4 liable “for any and all amounts owed by Foursquare that arose after January 23, 2014, the date 5 that the Noordas filed their Chapter 7 Bankruptcy Petition.”28 If the Trusts sought to hold the 6 Noordas liable for unpaid contributions that arose before January 23, 2014—and it does not 7 appear that they did—they have now abandoned that claim. So, defendants’ argument is 8 factually wrong. In sum, the defendants’ issue-preclusion and discharge-injunction arguments lack merit, 9 10 and their claim-preclusion argument is just too undeveloped for me to rule on it. Defendants 11 have therefore failed to demonstrate that they are entitled to summary judgment. 12 C. The Trusts’ motion for summary judgment [ECF No. 63] 13 The Trusts move for summary judgment on their claim that Foursquare is a “successor 14 employer” to NSM and, thus, is obligated to contribute to the Trusts under the collective15 bargaining agreement. “[S]uccessorship liability” is “a common-law doctrine” developed by 16 federal courts in the “the fields of labor and employment” “‘that provides an exception from the 17 general rule that a purchaser of assets does not acquire a seller’s liabilities.’”29 In National 18 Labor Relations Board v. Jeffries Lithograph Co., the Ninth Circuit set forth seven factors that 19 courts must consider when deciding whether a new employer is a “successor” to an old one: (1) 20 “there has been a substantial continuity of the same business operations;” (2) “the new employer 21 uses the same plant;” (3) “the same or substantially the same work force is employed;” (4) “the 22 same jobs exist under the same working conditions;” (5) “the same supervisors are employed;” 23 (6) “the same machinery, equipment, and methods of production are used;” and (7) “the same 24 25 28 26 29 ECF No. 54 at 32 (quoting ECF No. 1 at 13). Resilient Floor Covering Pension Trust Fund Bd. of Trustees v. Michael’s Floor Covering, 801 F.3d 1079, 1090 (9th Cir. 2015) (Resilient Floor) (quoting Chi. Truck Drivers, Helpers & 27 Warehouse Workers Union (Indep.) Pension Fund v. Tasemkin, Inc., 59 F.3d 48, 49 (7th Cir. 28 1995)). 7 1 product is manufactured or the same service [is] offered.”30 The list is not “exhaustive”; the 2 “touchstone” of the inquiry is “whether there was an ‘essential change in the business that would 3 have affected employee attitudes toward” being represented by the union.31 “The primary 4 question in labor and employment successorship cases is whether, under the totality of the 5 circumstances, there is substantial continuity between the old and new enterprise.”32 And, 6 “[d]epending on the statutory context and the type of claim, certain factors may warrant greater 7 or lesser emphasis.”33 The Trusts provide evidence to show that the Jeffries factors weigh in favor of finding 8 9 that Foursquare is NSM’s successor for purposes of NSM’s obligation to pay employer 10 contributions under the collective-bargaining agreement.34 The defendants do not directly 11 address any of the Jeffries factors in responding to the Trusts’ motion. They focus instead on the 12 standards for claims that the Trusts did not move for summary judgment on, like breach of 13 contract and alter ego.35 Defendants do, however, provide evidence that Foursquare’s business 14 model and operations are quite different from what NSM’s were.36 Defendants admit there is some element of ownership common between NSM and 15 16 Foursquare. They also admit that Foursquare does the same type of architectural-sheet-metal, 17 metal-roofing, and metal-siding work that NSM did. But they provide Lamar’s deposition 18 30 N.L.R.B. v. Jeffries Lithograph Co., 752 F.2d 459, 463 (9th Cir. 1995) (quoted reference omitted). 19 31 Id. at 463–64 (quoting Premium Foods, Inc. v. N.L.R.B., 709 F.2d 623, 627 (9th Cir. 1983)). 20 21 22 32 Resilient Floor, 801 F.3d at 1090 (quotation marks, quoted references, and brackets omitted). 33 Id. at 1091. 34 See ECF 23 requests forNos. 63-2–63-39 (providing, among other evidence, the Noordas’ responses to admissions; deposition testimony of the Noordas; deposition testimony of Connie Berrett, who was employed by NSM and then by Foursquare; deposition testimony of Kelly 24 Regester, who was employed by NSM but not Foursquare; deposition testimony of Paul Dean, Foursquare for one 25 who used NSM for “very specialty-type work” for commercial projects andfor NSM and then such project; deposition testimony of Joe Carter, who worked as a foreman 26 Foursquare, and who testified that some of NSM’s other employees went to Foursquare, too). 35 See generally ECF No. 64. 27 28 36 See ECF No. 64-1 (deposition testimony of Lamar Noorda). 8 1 testimony to show that Foursquare does not do the conventional-roof or waterproofing work that 2 NSM did. It does not manufacture furniture or fireplaces like NSM did, and it does not perform 3 any projects that require bonding because, unlike NSM, it has no bonding capacity. Lamar 4 further testified that Foursquare has significantly less employees than NSM ever did. According 5 to Lamar, at its peak, NSM had 45 office workers while Foursquare has never had more than 6 three—two of them are Lamar and Elise. Unlike NSM, which had 75 field workers, Foursquare 7 has never had more than eight. Lamar testified that NSM owned or leased as many as 60 8 vehicles in its prime, while Foursquare has two. According to Lamar, NSM’s gross annual 9 revenues exceeded $40 million, but Foursquare’s are $2 million. Finally, Lamar testified that, at 10 its peak, 80% of NSM’s work was for large public-works projects, while Foursquare’s jobs are 11 typically $250–$500 jobs like “little kitchen repairs.” It is undisputed that Foursquare uses the same office that NSM did and acquired some of 12 13 its office equipment, machinery, tools, and vehicles. But the record is not clear if the vehicles 14 were actually owed by NSM or another of Noordas’ entities. It is undisputed that most of the 15 few workers that Foursquare has were NSM employees, but it is not clear, especially in light of 16 Lamar’s testimony about the difference in scale between NSM’s operations versus Foursquare’s, 17 if the jobs and working conditions are the same. It is also not clear from this record if 18 Foursquare has the same customers that NSM did.37 Finally, although the Trusts provide evidence to show that Foursquare does some of the 19 20 same projects that NSM did, Lamar testified that the size and complexity of those jobs are 21 significantly less than what NSM did, and there are many types of work that NSM did that 22 Foursquare does not do. Lamar is emphatic that Foursquare does not—and cannot, for many 23 reasons—do the same work that NSM did. When viewing the facts in the light most favorable to 24 the defendants and considering the totality of the circumstances, I conclude that genuine issues 25 26 37 C.f. Resilient Floor, 801 F.3d at 1095 (concluding that whether the new employer has the “same body of customers [as the old one] . . . is of special significance when determining 27 successorship for purposes of withdrawal liability under the MPPAA construction industry 28 exception”). 9 1 of material fact preclude me from finding as a matter of law that Foursquare is NSM’s successor 2 employer. 3 Conclusion 4 Accordingly, IT IS HEREBY ORDERED that the defendants’ motion for summary 5 judgment and the Trusts’ motion for summary judgment [ECF Nos. 48, 63] are DENIED. 6 IT IS FURTHER ORDERED that this matter is referred to a magistrate judge for a 7 mandatory settlement conference. 8 Dated: March 30, 2018 _______________________________ ____________________ __ ______ __ _ _ U.S. District Judge Jennifer A. Dorsey District Judge Jennifer ist t d i 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10

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