Division 1181 Amalgamated Transit Union - New York Employees Pension Fund et al v. New York City Department of Education
MEMORANDUM AND ORDER granting 105 Motion for Summary Judgment. Discovery in this case is now closed, and the DOE moves for summary judgment in its favor. For the reasons that will be explained, no reasonable trier of fact could conclude that th e eleven non-party bus companies identified by the Fund are alter egos of the DOE. (As further set forth in this Order.) The DOE's motion for summary judgment is GRANTED. (Docket # 105.) The Clerk is directed to terminate the motion, enter judgment for the defendant and close the case. (Signed by Judge P. Kevin Castel on 8/30/2017) (cf)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DIVISION 1181 AMALGAMATED TRANSIT
UNION – NEW YORK EMPLOYEES PENSION
FUND, by its trustees,
NEW YORK CITY DEPARTMENT OF
This action is brought by plaintiffs Division 1181 Amalgamated Transit Union New York Employees Pension Fund and its board of trustees (collectively, the “Fund”). The
Fund is a multiemployer pension plan that provides retirement benefits to New York City school
bus drivers and other employees who work in student transportation. The Fund’s participants
include employees of eleven non-party bus companies that contracted with the New York City
Department of Education (the “DOE”). In or around 2013, their contracts with the DOE expired
and were not renewed. The bus companies each withdrew from the Fund around that time.
In this action, the Fund seeks to hold the DOE liable for failing to pay employee
contributions. In a prior ruling, this Court partially granted the DOE’s motion to dismiss
pursuant to Rule 12(b)(6), Fed. R. Civ. P., and dismissed claims alleging that the DOE had direct
contractual obligations to the Fund, or that it functioned as a single or joint employer with the
eleven non-party bus companies. Div. 1181 Amalgamated Transit Union - New York
Employees Pension Fund v. New York City Dep’t of Educ., 2014 WL 4370724, at *8 (S.D.N.Y.
Aug. 27, 2014), reconsideration granted in part, 2014 WL 6647368 (S.D.N.Y. Nov. 24, 2014).
The remaining claims assert that the eleven non-party bus companies are the
DOE’s corporate alter egos. According to the Fund, the DOE violated the Employee Retirement
Income Security Act, 29 U.S.C. § 1001, et seq. (“ERISA”), as amended by the Multiemployer
Pension Plan Amendments Act, 29 U.S.C. § 1381 (the “MPPAA”), by failing to make required
contributions to the Fund. In the aggregate, the Fund alleges that the DOE owes more than $100
million in payment for its alleged withdrawal liability.
Discovery in this case is now closed, and the DOE moves for summary judgment
in its favor. For the reasons that will be explained, no reasonable trier of fact could conclude that
the eleven non-party bus companies identified by the Fund are alter egos of the DOE. The
DOE’s motion for summary judgment is therefore granted.
Many of the facts set forth by the DOE are undisputed. To the extent that the
Fund disputes a fact, the Court accepts the Funds’ version. In all instances, the Court draws
every reasonable inference in favor of the Fund as the non-movant. Delaney v. Bank of Am.
Corp., 766 F.3d 163, 167 (2d Cir. 2014) (quotation marks omitted).
The DOE is a government entity that provides education to approximately 1.1
million students in New York City (the “City”) through the operation of approximately 1,600
public schools. (Def. 56.1 ¶ 2; Pl. 56.1 Resp. ¶ 2.) Under state law, the DOE is required to
award all busing contracts through competitive, sealed bidding. (Def. 56.1 ¶ 38; Pl. 56.1 Resp. ¶
The DOE’s history with bus contractors is important to an understanding of the
Fund’s claims. In 1979, following a strike by bus company employees, the DOE reached a
negotiated agreement with certain local transit unions. (Def. 56.1 ¶¶ 39-40; Pl. 56.1 Resp. ¶¶ 3940.) This agreement, known as the “Mollen Agreement,” provided for certain employee
protections that became standard in DOE busing contracts. (Def. 56.1 ¶¶ 41-51; Pl. 56.1 Resp.
The employee protections of the Mollen Agreement remained in place until 2012,
following litigation in which some bus companies successfully challenged certain employee
protections as unlawful. (Def. 56.1 ¶ 54; Pl. 56.1 Resp. ¶ 54.) In 2012 and 2013, the DOE
solicited bids for new bus contracts that would replace those set to expire in 2013. (Def. 56.1 ¶¶
54-56; Pl. 56.1 Resp. ¶¶ 54-56.) Numerous companies submitted sealed bids. (Def. 56.1 ¶ 56;
Pl. 56.1 Resp. ¶ 56.) When the DOE awarded new contracts, they did not contain the employee
protections that were standard under the Mollen Agreement. (Def. 56.1 ¶ 56; Pl. 56.1 Resp. ¶
Amid these changes to the contracting landscape, the DOE did not renew its
contracts with certain bus companies that had long provided student transportation. (Third Am.
Compl’t ¶ 91.) The Fund now contends that the DOE has withdrawal liability for eleven of those
companies, which it characterizes as alter egos of the DOE.
Each of those eleven companies entered into a collective bargaining agreement
(“CBA”) with Amalgamated Transit Union Local 1181-106, AFL CIO (“Local 1181”). (Def.
56.1 ¶ 90; Pl. 56.1 Resp. ¶ 90.) The DOE is not a signatory to the CBA, and was not directly
involved in its negotiation. (Def. 56.1 ¶ 91; Pl. 56.1 Resp. ¶ 91.) Each CBA defines “Employer”
as the respective bus company that executed the CBA. (Def. 56.1 ¶ 92; Pl. 56.1 Resp. ¶ 92.) The
CBA set forth the terms of certain employee protections and benefits, and the required employer
contributions to fund those benefits. (Def. 56.1 ¶¶ 93, 95; Pl. 56.1 Resp. ¶¶ 93, 95.) The CBA
permits Local 1181 to conduct routine audits of the bus companies to review their contributions
to the employee pension fund; while the union was permitted to conduct such audits, nothing in
the CBA permits the DOE to conduct audits. (Def. 56.1 ¶ 102; Pl. 56.1 Resp. ¶ 102.) As noted,
the Fund contends that the bus companies were the DOE’s alter ego for ERISA purposes. It
contends that, as an alter ego, the DOE has withdrawal liability to the Fund, to the same extent as
if it had been a signatory to the CBA with Local 1181.
The DOE’s summary judgment motion asserts that no reasonable trier of fact
could conclude that the eleven bus companies were its alter egos. In support of its motion, the
DOE has submitted evidence about each of the eleven companies, including facts about their
history, ownership, management, corporate form, business operations, revenue sources and the
consequences of the DOE’s failure to renew its contract with each company. (Def. 56.1 ¶¶ 104545; Pl. 56.1 ¶¶ 104-545.) The eleven bus companies alleged to be alter egos of the DOE
include three entities wholly owned by Atlantic Express Transportation Corp. (the “Atlantic
Entities”), Hoyt Transportation Corp. and a related company, DAK Transportation Corp.
(“Hoyt”), Logan Transportation Systems, Inc. (“Logan”), Canal Escorts, Inc. (“Canal”), B&M
Escorts Inc. (“B&M”), R and C Transit, Inc. (“R and C”), and Tufaro Transit Co., Inc. and a
related company, School Days Inc. (“Tufaro”). (See id.)
The Fund commenced this action on December 26, 2013, and alleged that the
DOE was liable to the Fund as a result of the bus companies’ withdrawal. (Docket # 1.) The
DOE moved to dismiss the Complaint for failure to state a claim pursuant to Rule 12(b)(6). This
Court granted the motion in part, but concluded that the Complaint plausibly alleged that, for
ERISA purposes, the non-party bus companies functioned as corporate alter-egos of the DOE.
Division 1181 Amalgamated Transit Union - New York Employees Pension Fund v. New York
City Dep’t of Ed., 2014 WL 4370724 (S.D.N.Y. Aug. 27, 2014), reconsideration granted in part,
2014 WL 6647368 (S.D.N.Y. Nov. 21, 2014). The parties have engaged in extensive pretrial
discovery and discovery is now closed. The parties agree that any trial of this action would be to
the Court without a jury. (Docket # 63.)
SUMMARY JUDGMENT STANDARD.
Summary judgment “shall” be granted “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Rule 56(a), Fed. R. Civ. P. A fact is material if it “might affect the outcome of the suit
under the governing law . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). On
a motion for summary judgment, the court must “construe the facts in the light most favorable to
the non-moving party and resolve all ambiguities and draw all reasonable inferences against the
movant.” Delaney, 766 F.3d at 167 (quotation marks omitted). It is the initial burden of the
movant to come forward with evidence on each material element of his claim or defense,
demonstrating that he is entitled to relief, and the evidence on each material element must be
sufficient to entitle the movant to relief in its favor as a matter of law. Vt. Teddy Bear Co. v. 1800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004).
If the moving party meets its burden, “the nonmoving party must come forward
with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid
summary judgment.” Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 145 (2d Cir. 2008). “A
dispute regarding a material fact is genuine ‘if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.’” Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d
Cir. 2000) (quoting Anderson, 477 U.S. at 248).
Determination of alter-ego status is generally a question of fact. See, e.g., Moore
v. Navillus Tile, Inc., 2016 WL 750797, at *8 (S.D.N.Y. Feb. 24, 2016) (McMahon, J.). Thus,
summary judgment is inappropriate when the evidence would permit a reasonable trier of fact to
conclude that one organization is the alter ego of another. See id.
A. The Law of ERISA Alter Egos.
“The purpose of the alter ego doctrine in the ERISA context is to prevent an
employer from evading its obligations under the labor laws ‘through a sham transaction or
technical change in operations.’” Ret. Plan of UNITE HERE Nat’l Ret. Fund v. Kombassan
Holding A.S., 629 F.3d 282, 288 (2d Cir. 2010) (quoting Newspaper Guild of N.Y., Local No. 3
of the Newspaper Guild, AFL-CIO v. NLRB, 261 F.3d 291, 298 (2d Cir. 2001)); accord Lihli
Fashions Corp. v. N.L.R.B., 80 F.3d 743, 748 (2d Cir. 1996), as amended (May 9, 1996). Alterego status binds a non-signatory to the terms of a CBA. United Union of Roofers,
Waterproofers, & Allied Workers Local No. 210, AFL-CIO v. A.W. Farrell & Son, Inc., 547 F.
App’x 17, 22 (2d Cir. 2013) (summary order). If an entity is an alter ego for ERISA purposes,
Courts will pierce the corporate veil in order to protect employee benefits. UNITE, 629 F.3d at
Alter-ego status is determined by a “flexible” test that weighs the circumstances
of each case, and considers the “important” factors of “‘whether the two enterprises have
substantially identical management, business purpose, operation, equipment, customers,
supervision, and ownership.’” Id. (quoting Goodman Piping Prods., Inc. v. NLRB, 741 F.2d 10,
11 (2d Cir. 1984)). Evidence of anti-union animus is “germane” to the analysis, but not
The inquiry “depends on ‘the totality of the facts.’” Trustees of the New City
Dist. Council of Carpenters Pension Fund v. Integrated Structures Corp., 595 Fed. App’x 15, 17
(2d Cir. 2014) (summary order) (quoting United States v. Funds Held in the Name or for the
Benefit of Wetterer, 210 F.3d 96, 106 (2d Cir. 2000)). UNITE affirmed the district court’s
finding of alter-ego status when the chairman of a parent company exercised total control over
four assignee companies and was the sole shareholder of each. 629 F.3d at 289; see also
Gesualdi v. Juda Const., Ltd., 2011 WL 5075438, at *8-9 (S.D.N.Y. Oct. 25, 2011) (concluding
at summary judgment that companies were alter egos for ERISA purposes based on their
common ownership, management, business purpose, operations, equipment, employees and
customers) (Berman, J.). But even “substantial overlap in management and operations,” without
more, is inadequate to establish alter-ego status. Council of Carpenters, 595 Fed. App’x at 1718. When companies have different business purposes, different telephone numbers, file
separate tax returns, maintain separate bank accounts and finances, and do not share the same
equipment, such facts weigh against alter-ego status, and must be considered by a trier of fact.
Id. at 18.
As noted, the DOE has come forward with detailed evidence concerning each of
the eleven non-party bus companies. In opposition, the Fund has come forward with facts that, it
contends, permit a reasonable trier of fact to conclude that the companies functioned as an alter
ego of the DOE. In reviewing the factors used to decide alter-ego status, the Court ultimately
weighs the totality of the facts, applying a flexible test that considers the unique context of this
case. But, on a summary judgment motion, the Court may not engage in fact-finding or
credibility assessment. Instead it must determine, based upon the totality of facts and drawing
every reasonable inference in the non-movant’s favor, whether a reasonable fact finder could
find in the Funds’ favor.
B. The Fund Has Not Come Forward with Evidence of Common Ownership.
The Fund has not come forward with evidence that the DOE and its eleven
purported alter egos have substantially identical ownership. See UNITE, 629 F.3d at 288. As
noted, the DOE is a school district and a government entity. (Def. 56.1 ¶¶ 1-2; Pl. 56.1 Resp. ¶¶
1-2.) Both the City and the State of New York have authority over the DOE. (Def. 56.1 ¶¶ 7-13;
Pl. 56.1 Resp. ¶¶ 7-13.)
The DOE has come forward with undisputed evidence that the eleven bus
companies are private firms. The three Atlantic Entities were respectively founded in 1979,
1998 and 2005. (Def. 56.1 ¶¶ 115, 117, 119; Pl. 56.1 Resp. ¶¶ 115, 117, 119.) Their parent
company began as a family-owned business, which was sold to a private equity fund in 1998,
and, in turn, sold to an investment firm in 2009. (Def. 56.1 ¶¶ 104-11; Pl. 56.1 Resp. ¶¶ 104-11.)
Hoyt, Logan and Canal are family-owned businesses. (Def. 56.1 ¶ 200, 329, 381; Pl. 56.1 Resp.
¶ 200, 329, 381.) B&M began as a partnership, but in 2000 all partnership interests were
acquired by the company’s current owner and president. (Def. 56.1 ¶¶ 428-33; Pl. 56.1 Resp. ¶¶
428-33.) R and C is a corporation owned by two shareholders. (Def. 56.1 ¶ 473; Pl. 56.1 Resp. ¶
473.) Tufaro began as a partnership, until all partnership interests were transferred to a sole
shareholder, with ownership then transferred through a succession of sole shareholders. (Def.
56.1 ¶¶ 501-05; Pl. 56.1 Resp. ¶¶ 501-05.)
In opposition, the Fund has not offered evidence that the DOE has an ownership
interest in any of the eleven non-party bus companies. It acknowledges that the DOE did not
“technically” own the bus companies. (Opp. Mem. at 18.) The Fund instead notes that the DOE
sometimes provided non-recourse loans to the bus companies, and also arranged for insurance
and fuel discounts. (Pl. 56.1 Resp. ¶ 112; Pl. 56.1 ¶¶ 35-56.) The Fund describes how
contractors’ vehicles were insured by the DOE, cites deposition testimony from a DOE witness
who described the insurance as “a largely subsidized insurance program for the school age,
school bus fleet,” and the testimony of other witnesses who said that the DOE’s subsidized
insurance was necessary in order to make bus contracts economically viable. (Pl. 56.1 ¶¶ 35-52.)
Other witnesses testified that the bus companies relied on DOE payments in order to meet their
obligations to pay into employee benefit funds. (Pl. 56.1 ¶¶ 57-60.)
Evidence of subsidies or coordination by the DOE is not evidence of common
ownership. The eleven bus companies independently elected to do business with the DOE. To
the extent that the DOE arranged for the insurance used by the bus companies, or made payments
to the companies, a reasonable trier of fact would not conclude that such actions are evidence
that the DOE owns the private bus companies.
This factor weighs against classifying the eleven non-party bus companies as an
alter ego of the DOE.
C. The Fund Has Not Come Forward with Evidence of Common Management.
The Fund has not come forward with evidence that would permit a reasonable
trier of fact to conclude the DOE and the eleven bus companies have substantially identical
management. See UNITE, 629 F.3d at 288.
The DOE has come forward evidence that the eleven bus companies each had
management that was independent of the DOE. The Fund does not dispute that the Atlantic
Entities independently developed business strategies, managed their own budgeting and
accounting, made hiring and salary decisions, and devised plans to provide safe and timely
service, all independent of the DOE. (Def. 56.1 ¶¶ 137-64; Pl. 56.1 Resp. ¶¶ 137-64.) The other
bus companies also had separate management that independently made business and personnel
decisions. (Def. 56.1 ¶¶ 263-80, 349-58, 409-23, 455-66, 486-96, 532-40; Pl. 56.1 Resp. ¶¶ 26380, 349-58, 409-23, 455-66, 486-96, 532-40.) The bus companies retained accounting firms and
legal counsel of their choosing. (See, e.g., Def. 56.1 ¶¶ 272-75, 351, 412-15, 457; Pl. 56.1 Resp.
¶¶ 272-75, 351, 412-15, 457.)
In opposition, the Fund has not set forth evidence to show overlapping
management between the DOE and the eleven non-party bus companies. Rather, it points to
evidence that the bus companies tailored their businesses to the standards and needs of the DOE.
The Fund notes that the DOE set standards for drivers and other employees who supervised
students, and assigned the companies to specific routes and bus stops. The DOE’s requirements
specifically included the hiring of aides with the job title of “escort,” who assisted in the
transport of handicapped students and were required by City law. (Opp. Mem. at 4; Def. 56.1 ¶¶
67-68; Pl. 56.1 Resp. ¶¶ 67-68.) The Fund also cites to testimony from managers of the bus
companies who testified that they felt obligated to satisfy DOE demands, requests and
assignments. (Pl. 56.1 ¶¶ 174-82.) A rational economic actor supplying goods or services to a
major customer can be expected to cater to the wants, needs and desires of that customer.
Evidence of efforts to meet a customer’s standards and preferences is not evidence of common
management. No reasonable trier of fact could conclude that this is evidence of common or
This factor weighs against classifying the eleven non-party bus companies as alter
egos of the DOE.
- 10 -
D. The Fund Has Not Come Forward with Evidence that the DOE and the Bus
Companies Shared Common Operations or Equipment.
The Fund has not come forward with evidence that the DOE and the eleven bus
companies share common operations or equipment. See UNITE, 629 F.3d at 288.
The bus companies operate out of separate, independent locations throughout the
City, and, in some instances, throughout the United States. (Def. 56.1 ¶¶ 126-28, 228-32, 33848, 394-408, 446-54, 483-85, 526-28; Pl. 56.1 Resp. ¶¶ 126-28, 228-32, 338-48, 394-408, 44654, 483-85, 526-28.) The bus companies all own or lease the vehicles that they used to transport
students. (Def. 56.1 ¶¶ 173, 178, 314-18, 425, 497-98; Pl. 56.1 Resp. ¶¶ 173, 178, 314-18, 425,
497-98.) There is no evidence that the DOE had an ownership interest in the equipment used by
the bus companies.
In opposition, the Fund states that the DOE required the companies to use
proprietary computer programs that set bus routes and logged complaints. (Pl. 56.1 ¶¶ 98-103.)
It notes that the DOE gave bus companies $3,000-$4,000 payments to update air conditioning
systems and obtained third-party grants for the installment of reduced-emissions diesel filters.
(Pl. 56.1 ¶¶ 109-12.) The DOE also set certain restrictions on the use of school buses for nonDOE work. (Pl. 56.1 ¶¶ 124-29.)
A reasonable trier of fact could not conclude that this is evidence of common
operations or equipment. Given the DOE’s dependence upon these vendors to transport students
to schools, payments to update air-conditioning systems (which benefit the DOE’s student
population) or to reduce diesel emissions (which benefits the City, its citizens and its students) is
rational conduct independent of any common operations or equipment. The Fund does not
- 11 -
contend that, for example, that the DOE obtained a secured interest in the air conditioners or
diesel filters that it helped the companies to obtain, or explain why certain restrictions on the
after-hours use of school buses gave the DOE ownership interest in the vehicles. Moreover, the
use of a computer program to communicate bus routes is evidence that the DOE worked to
coordinate a complex transportation system involving numerous bus contractors – not that the
contractors were corporate alter egos established to avoid ERISA obligations.
This factor weighs against classifying the eleven non-party bus companies as alter
egos of the DOE.
E. The Fund Has Not Come Forward with Evidence that the DOE and the Bus
Companies Shared a “Business Purpose” that Is “Substantially Identical.”
“In the ordinary case, two entities have the same ‘business purpose’ if they deal in
the same product or service.” Newspaper Guild of New York, Local No. 3 of Newspaper Guild,
AFL-CIO v. N.L.R.B., 261 F.3d 291, 299 (2d Cir. 2001). But operations in the same industry
does not establish a shared business purpose. See Lihli Fashions, 80 F.3d at 749 (fashion
manufacturer and fashion marketer did not share a common business purpose). Moreover, where
one company exists to make a profit and another is “legally barred from earning any profits at
all,” that distinction alone may be sufficient grounds to conclude that they do not share a
business purpose. Newspaper Guild, 261 F.3d at 300-01.
As the Fund points out, the DOE and the eleven bus companies shared a common
goal to provide for the safe and timely transportation of New York City students. (Opp. Mem. at
11; Pl. 56.1 ¶¶ 132-37.) But the DOE’s purpose is to educate schoolchildren in its capacity as a
not-for-profit governmental agency. In contrast, the bus contractors were private firms in
business for the purpose of earning a profit from transporting students. It is no more of a shared
common business purpose than that of vendor and vendee of any long-term supply contract. The
- 12 -
purchaser hopes that during the life of the contract, the goods or services will be delivered in
conformity with the contract and in accord with its needs, and the seller hopes to be paid by a
happy purchaser in a timely fashion. A reasonable trier of fact could not conclude that the bus
companies and the DOE had shared a common “business purpose.” See UNITE, 629 F.3d at
This factor weighs against classifying the eleven non-party bus companies as alter
egos of the DOE.
F. The Fund Has Not Come Forward with Evidence that the DOE and the Bus
Companies Shared Common Customers.
According to the Fund, students were the customers of both the DOE and the
eleven non-party bus companies. The Fund argues that this factor weighs in favor of alter-ego
But the Fund has not come forward with evidence to defeat the DOE’s showing
that the DOE itself was the customer of the bus companies. Given the commercial relationships
between the DOE and the bus companies, no reasonable trier of fact could conclude that public
school students were a common customer of the DOE and the bus companies.
In order to win business, the eleven non-party bus companies, along with other
bus companies, engaged in competitive, sealed bidding with the DOE. (See, e.g., Def. 56.1 ¶¶
38, 54-56; Pl. 56.1 Resp. ¶¶ 38, 54-56.) The DOE awarded contracts based on those bids. (Def.
56.1 ¶ 56; Pl. 56.1 Resp. ¶ 56.) As discussed, pursuant to these contracts, the DOE paid the bus
companies and directed the services that they would provide. The DOE was the client of the bus
companies, as the word is typically understood.
By contrast, there is no evidence that the bus companies had commercial or
business relationships with the students that they transported. The Fund notes that the DOE
- 13 -
required bus companies to hire “customer service liaisons” who interacted with the DOE, schools
and parents. (Pl. 56.1 ¶¶ 140-44.) But the colloquial term “customer service liaisons” does not
make schoolchildren or their parents the customers of the bus companies. No student, parent of a
student, or group of students or parents had the authority to direct the actions of the eleven bus
companies. They did not have authority to hire or fire the bus companies, nor did they pay them
for their services. That the transportation may have been for the students’ ultimate benefit does
not render them customers for the purposes of establishing an alter ego relationship under
This factor weighs against classifying the eleven non-party bus companies as alter
egos of the DOE.
G. The DOE Exercised Some Supervision over the Bus Companies.
The Fund has come forward with evidence that the DOE exercised supervision
over the bus companies. Viewed in context, however, its supervision related to safety issues and
staffing qualifications governed by extensive statutory and regulatory requirements. Given the
nature of the DOE’s supervision, a reasonable finder of fact would afford this evidence minimal
weight toward the ultimate issue of alter ego status.
The Fund has come forward with evidence that the DOE regularly performed
vehicle-safety inspections and set safety standards. (Pl. 56.1 ¶¶ 268-80.) DOE investigators
sometimes had direct communications with the companies’ drivers and gave them performance
guidance. (Pl. 56.1 ¶ 291-304.) Throughout its submissions, the Fund discusses employees with
the job title “escort,” who were required by law to provide assistance to handicapped children
while they were being transported. The Fund has come forward with some evidence that the
- 14 -
DOE gave instruction to drivers and escorts outside of the presence of company management.
(Pl. 56.1 ¶¶ 301-04.)
The DOE’s supervision arises in substantial part from safety requirements set by
federal law, the New York State Education Law and the New York City Administrative Code.
(See, e.g., Def. 56.1 ¶¶ 58-79; Pl. 56.1 Resp. ¶¶ 58-79.) Viewed in this context, the DOE’s
supervisory activities are not intrusions on the corporate formalities of the non-party bus
companies, but part of an effort to ensure student safety and the DOE’s compliance with legal
Moreover, the bus companies also implemented their own company-specific
hiring standards and set guidelines for employee conduct. For example, Logan distributed its
own employee handbook to each employee and conducted background screenings of applicants
and Canal conducted its own driver training program. (Def. 56.1 ¶¶ 367-75, 416; Pl. 56.1 Resp.
¶¶ 367-75, 416.)
The Court therefore concludes that although the DOE sometimes acted in a
supervisory capacity over the bus companies and their employees, a reasonable trier of fact
would place minimal weight on this supervision as evidence of ERISA alter ego status.
H. There Is No Evidence that the DOE Formed the Bus Companies to Evade
Typically, the alter ego doctrine in the ERISA context applies to “situations
involving successor companies” or “to situations where the companies are parallel companies.”
UNITE, 629 F.3d at 288. While the eleven non-party bus companies may have tailored aspects
of their businesses around their contracts with the DOE, the Fund has come forward with no
evidence that would tend to show that the bus companies are successors to any DOE entity or
that they operate “parallel” to the DOE.
- 15 -
Animus toward unions is also non-dispositive evidence of alter ego status. See id.
According to the Fund, when the DOE first began to implement the Mollen Agreement in 1979,
the standard employee protections used in busing contracts had the effect of insulating the DOE
from labor obligations, including withdrawal liability. (Opp. Mem. at 18-19.) According to the
Fund, the DOE strategically shifted withdrawal liability to outside bus companies and thus
avoided subjecting itself to payment obligations. (Id.)
The desire of a vendee of services, such as the DOE, to shift a liability from its
own account to that of its vendors, the bus companies, is unremarkable in arm’s-length
commercial relationships. It is perfectly consistent with the economic interests of the DOE,
though adverse to the economic interests of the bus companies. Characterizing the DOE’s
motivation as anti-union animus is based on speculation. Moreover, under the Mollen
Agreement, the DOE’s contracts with bus companies incorporated employee protections as part
of their standard terms. Those protections stayed in place until 2012, when certain bus
companies successfully challenged their use in court. The Fund has not pointed to evidence of
anti-union animus by the DOE.
I. Flexibly Reviewing the Alter Ego Factors in Full Context, No Reasonable
Trier of Fact Could Conclude that the Eleven Non-Party Bus Companies
Functioned as an Alter Ego of the DOE.
The Court has reviewed the parties’ evidence in light of the factors used to
determine ERISA alter ego status, and comfortable concludes that no reasonable trier of fact
could conclude that the non-party bus companies are an alter ego of the DOE.
The Fund has not come forward with evidence that the DOE and the bus
companies have overlapping ownership and management. The DOE, by contrast, has come
forward with undisputed evidence that the bus companies were independently owned and
- 16 -
operated, and that their management did not overlap with the DOE. The DOE’s role in procuring
insurance for its contractors is not evidence of common ownership or management, nor is
evidence that the bus companies worked to satisfy the performance demands and expectations set
by the DOE. A reasonable business that contracts with a government entity would seek to
perform adequately under its contract and tailor its work according.
To the extent that the DOE directly supervised the operations of the bus
companies, that oversight involved vehicle safety and the qualifications of personnel responsible
for student safety. Those issues are governed by federal, state and City laws. Even if they were
not, it is reasonable that the DOE would take some steps to ensure that its students received safe
transportation. The nature of this oversight and supervision is afforded minimal weight in favor
of alter ego status. Without more, no reasonable trier of fact could conclude that it is evidence
that the bus companies were the DOE’s alter ego.
Further, the Fund has not come forward with evidence that the eleven non-party
bus companies shared common facilities or equipment with the DOE. It is undisputed that the
bus companies owned their own vehicles. Their facilities and equipment were owned
independent of the DOE and of one another.
Lastly, the Fund has not come forward with evidence that the DOE’s contracts
with the bus companies were a result of anti-union animus, or that the companies were formed
by the DOE to avoid ERISA obligations.
In light of the foregoing, the Court concludes that no reasonable finder of fact
could conclude that the eleven non-party bus companies identified by the Fund are alter-egos of
the DOE, such that the DOE was effectively a signatory to the CBA and therefore subject to
withdrawal liability under ERISA and the MPPAA.
- 17 -
The DOE’s motion for summary judgment is GRANTED. (Docket # 105.) The
Clerk is directed to terminate the motion, enter judgment for the defendant and close the case.
Dated: New York, New York
August 30, 2017
- 18 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?