Trustees of the Mosaic and Terrazzo Welfare, Pension, Annuity and Vacation Funds et al v. Continental Floors, Inc. et al

Filing 19

ORDER denying 12 Motion to Dismiss for Failure to State a Claim; denying 12 Motion to Dismiss for Lack of Jurisdiction; denying 12 Motion for Summary Judgment. Ordered by Judge I. Leo Glasser on 10/15/2013. (Parachini, Alexander)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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TRUSTEES OF THE MOSAIC & TERRAZZO
WELFARE PENSION, ANNUITY,
& VACATION FUNDS, et al.,
Plaintiff,

MEMORANDUM AND ORDER

- against -

13 CV 1739 (ILG) (SMG)

CONTINENTAL FLOORS, INC., et al.,
Defendant.
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GLASSER, United States District Judge:
Plaintiffs, the trustees of several employee benefit plans, bring this action against
defendants Continental Floors, Inc. (“Continental”) and Reliance Floor, Inc. (“Reliance,”
and together with Continental, “defendants”), alleging that defendants constitute a
single employer or alter egos of one another, such that Reliance is bound by a collective
bargaining agreement to which Continental is a signatory and both are liable to
plaintiffs for delinquent employer contributions.
Currently before the Court is defendants’ motion to dismiss the complaint for
lack of subject matter jurisdiction under 29 U.S.C. § 185; to dismiss the complaint for
failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure;
or for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.
For the reasons that follow, defendants’ motion is DENIED.
BACKGROUND
I.

Facts & Procedural History
The following facts are taken from plaintiffs’ complaint and are accepted as true

for purposes of this motion. Plaintiffs are the trustees of a group of multiemployer
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labor-management trust funds (the “Funds”), which are employee benefit plans within
the meaning of section 3(3) of the Employee Retirement Income Security Act of 1974
(“ERISA”, 29 U.S.C. §§ 1001 et seq.). Complaint dated April 1, 2013 ¶¶ 4–6 [Dkt. No. 1]
(“Compl.”). Continental is a party to a collective bargaining agreement (the “CBA”) with
the Mosaic, Terrazzo and Chemical Product Decorative Finisher Masons Workers
Association Local No. 7 of New York, New Jersey & Vicinity of the International Union
of Bricklayers and Allied Craftworkers (the “Union”). Id. ¶ 10. The CBA applies to all
work “of the type covered by [the CBA]” performed by Continental, whether “under its
own name, as an alter ego or under the name of another . . . wherein [Continental]
(including its officers, directors, owners, partners or stockholders) exercises either
directly or indirectly (such as through family members) any significant degree of
ownership, management or control.” Id. ¶ 13 (quoting the CBA). Pursuant to the CBA,
Continental is obligated to make monthly contributions to the Funds based on the
number of hours of employment of its employees within the trade and geographical
jurisdiction of the Union during the preceding month. Id. ¶ 12.
Reliance is not a signatory to the CBA, and does not make contributions to the
Funds. However, plaintiffs allege that Reliance is bound by the CBA, either because it is
an alter ego of Continental or because the two constitute a single employer. Plaintiffs
allege that Continental and Reliance have substantially identical management, business
purposes, operations, equipment, customers, supervision, and ownership, and that
Continental exercises control over Reliance. Id. ¶ 16, 23. In addition, plaintiffs allege
that Continental and Reliance share a location and telephone number, id. ¶ 17, common
employees, id. ¶ 18, and common insurance coverage, id. ¶ 21, and that Continental has

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used Reliance to perform work covered by the CBA and evade its contribution
obligations to the Funds since May 2007. Id. ¶ 27.
Under the CBA, plaintiffs “have the authority to have an independent Certified
Public Accountant audit the time books, payroll and wage records of the Employer for
the purpose of determine the accuracy of contributions to the funds.” Id. ¶ 14 (quoting
the CBA). Prior to commencing this action, Plaintiffs requested access to Continental’s
records for the period beginning January 1, 2010, but Continental did not produce all of
the relevant records. Id. ¶ 26. Plaintiffs also requested that Continental provide them
access to records of Reliance, which request was denied. Id. ¶ 33.
Plaintiffs initiated this action by filing their Complaint in this Court on April 1,
2013. Dkt. No. 1. The defendants answered the Complaint on May 14, 2013. Dkt. Nos.
7, 8. Discovery has only recently commenced and is not scheduled to be completed until
December 6, 2013. See Dkt. No. 11. On August 8, 2013, defendants moved to dismiss
the complaint for lack of statutory subject matter jurisdiction and failure to state a
claim, or, in the alternative, for summary judgment. Dkt. No. 12 (“Defs.’ Mem.”).
Plaintiffs filed their opposition on September 9, 2013. Dkt. No. 13 (“Pls.’ Opp’n”).
Defendants filed their reply on September 19, 2013. Dkt. No. 18 (“Defs.’ Reply”).
II.

Legal Standard
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to

include “a short and plain statement of the claim showing that the pleader is entitled to
relief.” To survive a motion to dismiss pursuant to Rule 12(b)(6), the plaintiff’s pleading
must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility “when the
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plaintiff pleads factual content that allows the Court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
Although detailed factual allegations are not necessary, the pleading must include more
than an “unadorned, the-defendant-unlawfully-harmed-me accusation;” mere legal
conclusions, “a formulaic recitation of the elements of a cause of action,” or “naked
assertions devoid of further factual enhancement” by the plaintiff will not suffice. Id.
(internal quotations and citations omitted). This plausibility standard “is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556). Determining whether a
complaint states a plausible claim for relief is “a context-specific task that requires the
reviewing court to draw on its judicial experience and common sense. But where the
well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is
entitled to relief.’” Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). Thus, on a
motion to dismiss for failure to state a claim, “the issue is not whether a plaintiff will
ultimately prevail but whether the claimant is entitled to offer evidence to support the
claims.” York v. Ass’n of the Bar of City of N.Y., 286 F.3d 122, 125 (2d Cir. 2002)
(quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).
“In adjudicating a Rule 12(b)(6) motion, a district court must confine its
consideration to facts stated on the face of the complaint, in documents appended to the
complaint or incorporated in the complaint by reference, and to matters of which
judicial notice may be taken.” Serdarevic v. Centex Homes, LLC, 760 F. Supp. 2d 322,
328 (S.D.N.Y. 2010) (quoting Leonard F. v. Israel Disc. Bank of N.Y., 199 F.3d 99, 107
(2d Cir. 1999)). If the Court considers “matters outside the pleadings,” then “the motion
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must be treated as one for summary judgment under Rule 56.” Fed. R. Civ. P. 12(d); see
Chambers v. Time Warner, Inc., 282 F.3d 147, 154 (2d Cir. 2002).
Defendants attach multiple certifications and exhibits to their motion.
Certification of Jairo Decarvalho dated July 19, 2013, Ex. A [Dkt. No. 12-3] (“Decarvalho
Cert.”); Certification of John A. Craner dated August 6, 2013 Exs. A-B [Dkt. No. 12-3]
(“Craner Cert.”). The Court will not consider these extrinsic documents in deciding
plaintiffs’ motion pursuant to Rule 12(b)(6). The certifications and their exhibits
contain, among other things, denials of certain allegations in the complaint and a list of
equipment owned by Continental. These materials are neither referenced nor relied
upon in the Complaint, and are not the kinds of facts that may be judicially noticed.
Fed. R. Evid. 201(b). Moreover, as discovery has only just begun and none of the parties
have produced even initial disclosures, plaintiffs may not have been aware of much of
this information and have not had any opportunity to rebut it. Since “lack of notice” is
the primary “harm to the plaintiff[s] when a court considers material extraneous to the
complaint,” the Court will not convert defendants’ motion to one for summary judgment
when plaintiffs have not yet had the benefit of discovery. Chambers, 282 F.3d at 153–
54. 1
DISCUSSION
In any event, these submissions cannot be considered on summary judgment. An unsworn declaration
such as the Decarvalho Certification may be treated as having “like force and effect” as a sworn
declaration provided that it is subscribed to, in writing “as true under penalty of perjury, and dated, in
substantially the following form: . . . ‘I declare (or certify, verify, or state) under penalty of perjury that the
foregoing is true and correct.’” 28 U.S.C. § 1746 (emphasis added). The attached certifications do not
conform to the statute, but rather state: “I hereby certify that the foregoing statements made by me are
true. If any of the foregoing statements made by me are willfully false, I recognize that I may be subject to
punishment.” Decarvalho Cert. at 4. “The substitution of ‘subject to punishment’ for ‘under penalty of
perjury’ is a substantial departure from the substance of the declaration provided in § 1746, and thus, does
not comply with the statute.” In re World Trade Ctr. Disaster Site Litig., 722 F.3d 483, 488 (2d Cir. 2013);
see also Silverman v. Miranda, 918 F.Supp.2d 200, 217–18 (S.D.N.Y. 2013) (holding that evidence
supported by declaration that did not comply with the requirements of 28 U.S.C. § 1746 “could not be
considered on summary judgment”).
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I.

Subject Matter Jurisdiction
Defendants first assert that this Court lacks jurisdiction to adjudicate any of the

claims in this action, because plaintiffs lack standing under 29 U.S.C. § 185. Defs.’ Mem.
at 2–4. Section 185 provides for jurisdiction in the district courts over “suits for
violations of contracts between an employer and a labor organization representing
employees in an industry affecting commerce.” 29 U.S.C. § 185(a). Defendants argue
that because plaintiffs are neither labor organizations nor employers, they “do not have
standing to sue under section 185.” Defs.’ Mem. at 2.
Defendants are correct that plaintiffs are neither labor organizations nor
employers. But the trustees of multiemployer plans have been held to be third-party
beneficiaries of the collective bargaining agreements that obligate employers to
contribute to those plans. See, e.g., Benson v. Brower’s Moving & Storage, Inc., 907
F.2d 310, 313 (2d Cir. 1990). Accordingly, plan trustees have repeatedly been held to
have standing to enforce the corresponding contribution provisions of such collective
bargaining agreements, even where they are not signatories to those agreements. See,
e.g., Fishbein v. Miranda, 670 F. Supp. 2d 264, 275–76 (S.D.N.Y. 2009). And this is
precisely what plaintiffs seek to do in this action. 2
Defendants also assert that this Court lacks jurisdiction under Section 515 of
ERISA. Defs.’ Mem. at 3–4. Section 515 provides that
[e]very employer who is obligated to make contributions to a
multiemployer plan under the terms of the plan or under the
terms of a collective bargaining agreement shall, to the
extent not inconsistent with law, make such contributions in
accordance with the terms and conditions of such plan or
such agreement.
Although not explicitly disputed in the Defendants’ Memorandum, it should be noted that this Court has
jurisdiction to decide plaintiffs’ claims for an order enforcing the audit provisions of the CBA on this same
basis.

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29 U.S.C. § 1145. Defendants argue that jurisdiction under section 515 is “premature”
until the Court has decided the alter ego and single employer issues, because Reliance
can only be bound by the CBA if it is determined to be an alter ego of, or to constitute a
single employer with, Continental. Defs.’ Mem. at 3–4.
Defendants have confused jurisdiction and liability. Plaintiffs do not allege that
section 515 creates jurisdiction in this Court for this action, see Compl. ¶ 2, but rather
that Reliance is liable under section 515 as an alter ego or single employer. Compl. ¶¶
36–41. Section 515 creates liability for failing to fulfill contribution obligations. 29
U.S.C. § 1145. Section 502 of ERISA (29 U.S.C. § 1132) creates jurisdiction, endowing
plan trustees with standing to enforce section 515. 3 Laborers Health & Welfare Trust
Fund for No. Cal. v. Advanced Lightweight Concrete Co., 484 U.S. 539, 547 (1988) (“The
liability created by § 515 may be enforced by the trustees of a plan by bringing an action
in federal district court pursuant to § 502.”). Nothing in either provision precludes
jurisdiction merely because the action is based on a certain theory of liability.
Local 812 GIPA v. Canada Dry Bottling Co. of N.Y., No. 98 CIV 3791 LMM, 1999
WL 301692 (S.D.N.Y. May 13, 1999), on which defendants place great reliance, is not to
the contrary. The court in Local 812 GIPA held that it lacked jurisdiction under either
29 U.S.C. § 185 or section 502 and 515 of ERISA only “over contribution claims based on
an expired CBA.” Id. at *4 (emphasis added) (citing Laborers, 484 U.S. at 548-89). The
CBA at issue in this action is not expired, but is currently in effect. Compl. ¶ 10. With
respect to pre-expiration claims, Local 812 GIPA held that there was jurisdiction under
both 29 U.S.C. § 185 and section 502 of ERISA, even in the absence of a written

Confusingly, defendants concede that this Court has jurisdiction pursuant to section 502 “to decide the
alter ego and single employer issues.” Defs.’ Mem. at 4.

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agreement requiring plan contributions, where the complaint alleged that the defendant
was an “alter ego of an entity that is a signatory to such an agreement.” Local 812 GIPA,
1999 WL 301692, at *4. Plaintiffs’ claims in this case are no different.
For the foregoing reasons, defendants’ motion to dismiss the complaint for lack
of subject matter jurisdiction is DENIED.
II.

Failure to State a Claim
Defendants next assert that Complaint fails to state a claim that Reliance is an

alter ego of Continental or that the two constitute a single employer, because the
relevant allegations in the Complaint are based solely “upon information and belief” and
are merely conclusory. Defs.’ Mem. at 5–6.
Under the single employer doctrine, “a collective bargaining agreement may be
enforced against non-signatory employers if the employers constitute a ‘single employer’
and if the employees of the companies constitute a single appropriate bargaining unit.” 4
Brown v. Sandimo Materials, 250 F.3d 120, 129 n.2 (2d Cir. 2001). “Separate
companies are considered a ‘single employer’ if they are part of a single integrated
enterprise.” Lihli Fashions Corp. v. NLRB, 80 F.3d 743, 747 (2d Cir. 1996) (per curiam).
Four factors are relevant to whether separate companies constitute a “single employer,”
none of which is controlling and not all of which need be present: “the interrelation of
operations, common management; centralized control of labor functions and common
ownership.” Id. “[T]he common use of facilities and equipment” is also relevant. Id.

“In determining whether the defendants’ employees constitute a ‘single bargaining unit,’ we look for a
‘community of interests’ among the relevant employees, and factors such as bargaining history,
operational integration, geographic proximity, common supervision, similarity in job function and degree
of employee interchange.” Sandimo Materials, 250 F.3d at 129 n.2. The parties do not appear to dispute
that the employees of Continental and Reliance would constitute a single bargaining unit, and indeed
defendants concede that their employees perform similar work in the same geographic region, and that
both companies perform work solely as subcontractors of the same company. Defs.’ Mem. at 12–13.
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“Ultimately single employer status depends on all the circumstances of the case and is
characterized by absence of an arm’s length relationship found among unintegrated
companies.” Id. (quotation and citations omitted).
“The alter ego doctrine, while having the same binding effect on a non-signatory
as the single employer/single unit doctrine, is conceptually distinct.” Truck Drivers
Local Union No. 807 v. Reg’l Import & Export Trucking, 944 F.2d 1037, 1046 (2d Cir.
1991). “[T]he focus of the alter ego doctrine . . . is on the existence of a disguised
continuance or an attempt to avoid the obligations of a collective bargaining agreement
through a sham transaction or technical change in operations.” Id. “The hallmarks of
the alter ego doctrine include whether the two enterprises have substantially identical
management, business purpose, operation, equipment, customers, supervision, and
ownership.” Id. (quotation omitted). “Although perhaps a germane or sufficient basis
for imposing alter ego status, an anti-union animus or an intent to evade union
obligations is not a necessary factor.” Ret. Plan of the UNITE HERE Nat’l Ret. Fund v.
Kombassan Holding A.S., 629 F.3d 282, 288 (2d Cir. 2010) (quotations omitted).
“Although the alter ego doctrine is primarily applied in situations involving successor
companies, where the successor is merely a disguised continuance of the old employer,
it also applies to situations where the companies are parallel companies.” Id. at 288
(quoting Mass. Carpenters Cent. Collection Agency v. Belmont Concrete Corp., 139 F.3d
304, 307 (1st Cir. 1998).
Plaintiffs allege that under either doctrine Reliance is bound by the CBA and
defendants are jointly and severally liable under section 515 of ERISA for delinquent

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contributions to the Funds. 5 Compl. ¶¶ 37–41. The Complaint contains the following
allegations regarding the relationship between Continental and Reliance, which
essentially mirror the factors courts consider in determining single employer and alter
ego status:
16. Upon information and belief, at relevant times, Continental
and Reliance had substantially identical management,
business purpose, operations, equipment, customers,
supervision, and/or ownership.
17. Upon information and belief, at relevant times, Continental
and Reliance operated at the same location and had the same
telephone number.
18. Upon information and belief, at relevant times, Continental
and Reliance shared common employees who performed
work covered by the CBAs.
19. Upon information and belief, at relevant times, Reliance paid
employees for work covered by the CBAs that the employees
performed for Continental, thereby aiding Continental to
evade the requirements of the CBAs.
20. Upon information and belief, at relevant times, employees of
Continental and Reliance interchanged between the
companies.
21. Upon information and belief, at relevant times, Continental
and Reliance shared common insurance coverage.
22. Upon information and belief, at relevant times, Continental
and Reliance acted as a single integrated enterprise. There
was never an arm’s length relationship between them.
23. Upon information and belief, at relevant times, Continental
and/or its officers, directors, owners, partners or
stockholders exercised or exercised, either directly or
indirectly, ownership, management or control over
Reliance’s operations.
Compl. ¶¶ 16–23.
5 Although addressed by the defendants, Defs.’ Mem. at 7, the doctrine of piercing the corporate veil is
inapplicable here, because the plaintiffs do not seek to hold Continental’s shareholders liable for the
obligation of Continental. The plaintiffs do not seek to hold Continental’s principals liable, nor do they
allege that Reliance is a shareholder of Continental.

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Applying Iqbal and Twombly, the Court must first “identify[]the allegations in the
complaint that are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 680.
Legal conclusions need not be accepted as true. Id. at 678. For the most part, these
allegations are not mere legal conclusions, although they do touch on the relevant
factors in the single employer and alter ego analyses. See Operating Eng’rs Local 101
Pension Fund v. Al Muehlenberger Concrete Constr., Inc., No. 13-2050-JAR-DJW, 2013
WL 5409116, at *6 (D. Kan. Sept. 26, 2013). 6 And the fact that they are based “upon
information and belief” does not preclude their being sufficient to show an entitlement
to relief. Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010).
The Court must next turn to whether the factual allegations, taken as true, state a
claim that is plausible on its face. Although the plausibility inquiry is “a context-specific
task,” Iqbal, 556 U.S. at 679, the decisions of other district courts that have considered
Iqbal and Twombly in the alter ego and single employer context are instructive. The
weight of authority compels the conclusion that the allegations in the Complaint,
although lean, are sufficient to state a plausible claim. See, e.g., Operating Eng’rs Local
101 Pension Fund, 2013 WL 5409116 (denying motion to dismiss where plaintiffs
summarily pleaded, “upon information and belief,” factors relevant to alter ego
determination); Trustees of the Hollow Metal Trust Fund v. FHA Firedoor Corp., No 12
Civ. 7069, 2013 WL 1809673 (S.D.N.Y. Apr. 30, 2013) (denying motion to dismiss where
plaintiffs “summarily pleaded each of” the factors of the alter ego test); Detroit
Carpenters Fringe Benefit Funds v. Andrus Acoustical, Inc., No. 11-14656, 2012 WL
601425 (E.D. Mich. Feb. 23, 2012) (finding that plaintiffs sufficiently pleaded an alter

Plaintiffs concede that the allegations in paragraphs 22 and 23 are legal conclusions. Pls.’ Opp’n at 9
n.2.
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ego claim where they alleged that the entities “share management, equipment, facilities,
employees, customers, and are both engaged in the [same] business” and that the
owners of each exercise control over the other); Flynn v. R.D. Masonry, Inc., 736 F.
Supp. 2d 54 (D.D.C. 2010) (holding that plaintiffs stated a plausible alter ego claim
where they alleged that the defendants had “common ownership or management,
and/or the same or similar employees, customers, and type of work” and that the
defendants had the same address). Taken as true, the allegations in the Complaint state
a plausible claim that, under the relevant factors, Reliance is the alter ego of Continental
or the two constitute a single employer.
The only relevant requirement of Rule 8(a)(2) is that a complaint contain a “short
and plain statement of the claim” showing that the Plaintiff is entitled to relief.
“[D]etailed factual allegations” are not required. Twombly, 550 U.S. at 555. Because the
allegations in the complaint give defendants “fair notice of what the claim is and the
grounds upon which it rests,” id., defendants’ motion to dismiss the Complaint for
failure to state a claim is DENIED.
III.

Summary Judgment
As discussed supra, with no record having yet been developed, it is inappropriate

for the Court to consider defendants’ motion for summary judgment at this time.
CONCLUSION
For the foregoing reasons, defendants’ motion is DENIED.
SO ORDERED.
Dated:

Brooklyn, New York
October 15, 2013

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/s/
I. Leo Glasser
Senior United States District Judge

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