Sheet Metal Workers International Associal Local No. 38 Insurance and Welfare Fund et al v. Haldean Sheet Metal Fabricators, Inc. et al

Filing 125

OPINION AND ORDER re: 110 MOTION for Summary Judgment . filed by Robert Hale, Florence Hale, Haldean Sheet Metal Fabricators, Inc. Defendants' motion for summary judgment is GRANTED as to whether Haldean's unpaid benefit contributions are plan assets (except to the extent they were actually withheld from employees' wages but not remitted to the Funds), and DENIED in all other respects. Plaintiffs' cross-motion for summary judgment is GRANTED as to (i) Ha ldean's liability for unpaid benefit contributions, and (ii) Florence Hale's status as an ERISA fiduciary. Plaintiffs' cross-motion is DENIED in all other respects. All counsel are directed to appear at a status conference on Decembe r 22, 2017 at 10:30 a.m., at which time the Court will set a trial date and a schedule for pretrial submissions. By December 21, 2017, the parties shall submit a Joint Pretrial Order in accordance with the Court's Individual Practices. The Clerk is instructed to terminate the motion. (Doc. #110). SO ORDERED., (Pretrial Order due by 12/21/2017., Status Conference set for 12/22/2017 at 10:30 AM before Judge Vincent L. Briccetti.) (Signed by Judge Vincent L. Briccetti on 11/21/17) (yv)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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TRUSTEES OF THE SHEET METAL
:
WORKERS INTERNATIONAL
:
ASSOCIATION LOCAL NO. 38 INSURANCE :
AND WELFARE FUND, et al.,
:
Plaintiffs,
:
:
v.
:
:
HALDEAN SHEET METAL FABICATORS,
:
INC., FLORENCE HALE, and ROBERT
:
HALE,
:
Defendants.
:
--------------------------------------------------------------x

OPINION AND ORDER
15 CV 5979 (VB)

Briccetti, J.:
Plaintiffs, Trustees of the Sheet Metal Workers International Association Local No. 38
Insurance and Welfare Fund, Sheet Metal Workers International Association Local No. 38 Profit
Sharing Plan, Sheet Metal International Association Local No. 38 Individual Vacation Account
Fund, Sheet Metal Workers Local 38 Labor Management Committee and Trust, Sheet Metal
Workers Local 38 Craft Training Fund, Sheet Metal Workers National Pension Fund, and Sheet
Metal Workers Local 38 Craft Training Building Fund, bring this action against defendants,
Haldean Sheet Metal Fabricators, Inc. (“Haldean”), Robert Hale, and Florence Hale, pursuant to
the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002 et seq. Plaintiffs seek
to collect unpaid fringe benefit contributions owed pursuant to a collective bargaining agreement
between Sheet Metal Workers International Association Local Union No. 38 (“Local 38”) and
defendant Haldean.
Now pending are defendants’ motion for summary judgment (Doc. #110) and plaintiffs’
cross-motion for summary judgment (Doc. #116). For the reasons set forth below, defendants’

1

motion is GRANTED IN PART and DENIED IN PART. Plaintiffs’ cross-motion is GRANTED
IN PART and DENIED IN PART.
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 29 U.S.C. §§
185(a), 1132(e).
BACKGROUND
The parties have submitted briefs, statements of fact pursuant to Local Civil Rule 56.1,
declarations and affidavits (“Aff.”), and supporting exhibits, which reflect the following factual
background.
I.

The Parties
Plaintiffs are trustees of multiemployer fringe benefit funds (the “Funds”) established and

administered in accordance with the Labor Management Relations Act (“LMRA”) and the
Employee Retirement Income Security Act (“ERISA”).
Haldean is a family owned steel fabrication and installation corporation. Individual
defendant Robert Hale and his late brother-in-law, Peter DeAngelis, incorporated Haldean in
1977. At an initial shareholders’ meeting on June 15, 1977, Robert Hale and Peter DeAngelis
adopted bylaws, appointed themselves directors of Haldean, and elected Hale’s wife, defendant
Florence Hale, as Haldean’s President and Secretary, and DeAngelis’s wife, Mary DeAngelis, as
Haldean’s Vice President and Treasurer.
Haldean operated out of 581 North State Road, in Briarcliff Manor, New York. In
approximately 1981, after several years renting the property, Robert Hale and Peter DeAngelis
formed North State Associates Partnership and purchased the property. From that time, Haldean
paid rent to North State Associates, with the rent being equivalent to North State Associates’s
monthly mortgage payment and common condominium charges.

2

At Haldean, Robert Hale managed sheet metal fabrication and installation, and Peter
DeAngelis managed sales, bidding, and client relationships, and was assisted by Florence Hale in
managing bill pay, collection, and payroll. When Peter DeAngelis died in 2009, Florence Hale
and Brian Mullins, a Haldean employee, took over many of Peter DeAngelis’s responsibilities.
Haldean failed to file New York State corporate tax returns between 2009 and 2015. As
a result, New York State dissolved Haldean by proclamation in 2012. In 2016, Haldean filed its
tax returns and was reinstated.
II.

The Collective Bargaining Agreement
In 1997, Haldean entered into a collective bargaining agreement (the “1998 CBA”) with

Local 38. The 1998 CBA became effective July 1, 1998. Pursuant to the 1998 CBA, Haldean
was required to make fringe benefit contributions to the Funds for each of its Local 38
employees.
The 1998 CBA provided for periodic updates to the union wage scale, and contained an
“evergreen” clause, stating:
This agreement shall become effective on the 1st day of July, 1998,
and shall remain in full force and effect until the 30th day of April,
2002, and shall continue in force from year to year thereafter unless
written notice of reopening is given not less than ninety (90) days
prior to the expiration date.
(R. Hale Aff. Ex. B: 1998 CBA, Art. XIII § 4). Following the 1998 CBA, Haldean was not
provided a subsequent CBA, and neither Haldean nor Local 38 issued a notice of reopening,
written or otherwise.
Local 38 entered into collective bargaining agreements in 2002, 2012, and 2015 (the
“subsequent CBAs”). However, Haldean did not receive or sign the subsequent CBAs.

3

III.

Haldean’s Delinquent Fringe Benefit Contributions
Wendy Santucci, an employee of the Funds, was responsible for union employers’

remittance of fringe benefit contributions. On a monthly basis, employers provided Santucci a
record of employee hours worked. Santucci then created an invoice reflecting benefit
contributions owed.
Haldean participated in this process, but in 2009 Haldean fell on hard times – Peter
DeAngelis died suddenly, Florence Hale was in poor health, and, according to defendants,
business was down. Haldean became delinquent in its benefit contributions, and by 2011 ceased
reporting employee hours to Santucci altogether. Santucci nevertheless input estimated hours for
Haldean’s employees on a monthly basis, crediting their vacation and annuity accounts, which
caused fund monies to be released. Santucci testified she credited those accounts in particular
because she was aware that workers reviewed them, and would notice any shortfall. Thus,
despite Haldean’s delinquency, those accounts were paid and up to date for Haldean’s
employees.
Santucci was also required to keep a record of employers whose benefit contributions
were delinquent or unpaid. Santucci provided the Funds’ manager, Mark Modzeleski, a list of
such employers each month. Modzeleski reviewed the list and forwarded it to Local 38. Richard
Pagano replaced Modzeleski in 2014, and he followed the same procedure.
In a number of telephone conversations, Santucci and Florence Hale discussed Haldean’s
delinquent benefit contributions. Despite her discussions with Florence Hale about Haldean’s
arrears, Santucci never relayed to Modzeleski or Pagano that Haldean’s benefit contributions
were unpaid.

4

Haldean’s six year delinquency ultimately was discovered in March 2015. Santucci was
supposed to send the National Pension Fund employer hours on a monthly basis, but at that time
she instead sent a single submission of Haldean’s hours for the years 2009-2015 (the “relevant
time frame”). Pagano questioned Santucci, who admitted she had not reported Haldean’s failure
to make benefit contributions. As a result, the Funds terminated Santucci.
On November 12, 2015, the Funds obtained a consent judgment against Santucci in the
amount of $1,682,509.94. Santucci remitted her retirement fund in partial satisfaction of the
judgment.
IV.

Haldean’s Payroll Audit
Although Local 38 typically audits employers every three years, Haldean was not audited

between 2003 and 2015. In 2015, after the National Pension Fund advised Pagano there was an
issue with Haldean’s hours, the accounting firm Novak Francella conducted a payroll audit.
Novak Francella’s report reflected that for the period January 1, 2009, to June 30, 2015, Haldean
owed the Funds $1,682,509.94. Of that amount, $321,689.31 is interest, and, according to
defendants, $213,720.72 represents contributions Haldean withheld from its employees’ wages
but failed to remit to the Funds.
DISCUSSION
I.

Summary Judgment Legal Standard
The Court must grant a motion for summary judgment if the pleadings, discovery

materials before the Court, and any affidavits show there is no genuine issue as to any material
fact and it is clear 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 (1986).

5

A fact is material when it “might affect the outcome of the suit under the governing law.
. . . Factual disputes that are irrelevant or unnecessary” are not material and thus cannot preclude
summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A dispute about a material fact is genuine if there is sufficient evidence upon which a
reasonable jury could return a verdict for the non-moving party. See Anderson v. Liberty Lobby,
Inc., 477 U.S. at 248. The Court “is not to resolve disputed issues of fact but to assess whether
there are any factual issues to be tried.” Wilson v. Nw. Mut. Ins. Co., 625 F.3d 54, 60 (2d Cir.
2010) (citation omitted). It is the moving party’s burden to establish the absence of any genuine
issue of material fact. Zalaski v. City of Bridgeport Police Dep’t, 613 F.3d 336, 340 (2d Cir.
2010).
If the non-moving party has failed to make a sufficient showing on an essential element
of his case on which it has the burden of proof, then summary judgment is appropriate. Celotex
Corp. v. Catrett, 477 U.S. at 323. If the non-moving party submits “merely colorable” evidence,
summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. at 249-50. The
non-moving party “must do more than simply show that there is some metaphysical doubt as to
the material facts, and may not rely on conclusory allegations or unsubstantiated speculation.”
Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011) (internal citations omitted). The
mere existence of a scintilla of evidence in support of the non-moving party’s position is
likewise insufficient; there must be evidence on which the jury could reasonably find for the
non-moving party. Dawson v. Cty. of Westchester, 373 F.3d 265, 272 (2d Cir. 2004).
On summary judgment, the Court construes the facts, resolves all ambiguities, and draws
all permissible factual inferences in favor of the non-moving party. Dallas Aerospace, Inc.
v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003). If there is any evidence from which a

6

reasonable inference could be drawn in favor of the non-moving party on the issue on which
summary judgment is sought, summary judgment is improper. See Sec. Ins. Co. of Hartford
v. Old Dominion Freight Line, Inc., 391 F.3d 77, 83 (2d Cir. 2004).
In deciding a motion for summary judgment, the Court need only consider evidence that
would be admissible at trial. Nora Bevs., Inc. v. Perrier Grp. of Am., Inc., 164 F.3d 736, 746 (2d
Cir. 1998).
II.

Haldean’s Liability for Unpaid Benefit Contributions
The Funds assert, and defendants do not dispute, that Haldean is liable for unpaid benefit

contributions for employee hours worked during the relevant time frame.
Accordingly, the Funds’ cross-motion for summary judgment as to Haldean’s liability for
unpaid benefit contributions is granted. 1
III.

The Hale Defendants’ Personal Liability for Unpaid Benefit Contributions
The Funds argue that Robert and Florence Hale (the “Hale defendants”) are personally

liable for unpaid benefit contributions on two grounds: (i) pursuant to ERISA, the unpaid benefit
contributions are “plan assets” for which the Hale defendants may be held liable as fiduciaries;
and (ii) the “special circumstances” doctrine permits the imposition of personal liability.
A.

Liability Pursuant to ERISA

The Funds first argue the Hale defendants are personally liable for all unpaid benefit
contributions for employee hours worked during the relevant time frame pursuant to their status
as fiduciaries of ERISA plan assets. The Hale defendants dispute whether Haldean’s unpaid

1

The Funds request that the Court enter judgment against defendants in the amount of
$1,360,820.63, plus interest and penalties as permitted by ERISA. Defendants dispute the
application of interest and penalties to unpaid benefit contributions. The Funds’ request for an
entry of judgment is premature, and will not be addressed at this time.

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benefit contributions properly are considered plan assets, and further dispute whether Robert
Hale was a fiduciary of plan assets.
As set forth below, the Court concludes that Haldean’s unpaid benefit contributions
(except to the extent they were actually withheld from employees’ wages but not remitted to the
Funds) are not plan assets pursuant to ERISA. The Court further concludes that Florence Hale
was a fiduciary of plan assets, but the Court cannot determine on summary judgment whether
Robert Hale was a fiduciary of plan assets.
ERISA provides that “[a]ny person who is a fiduciary with respect to a plan who
breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries . . . shall be
personally liable to make good to such plan any losses to the plan resulting from each such
breach.” 29 U.S.C. § 1109(a). “In order to establish that a person is personally liable as a
fiduciary of the plan, plaintiffs must prove ‘both that (1) the unpaid contributions were plan
assets and (2) [the individual] exercised a level of control over those assets sufficient to make
him a fiduciary.’” Sullivan v. Marble Unique Corp., 2011 WL 5401987, at *10 (E.D.N.Y. Aug.
30, 2011) (quoting In re Halpin, 566 F.3d 286, 289 (2d Cir. 2009)).
1.

Haldean’s Unpaid Benefit Contributions Are Not Plan Assets

In assessing the first factor, unpaid benefit contributions are not normally held to be
assets of a plan, unless the parties to a CBA contract otherwise. See In re Halpin, 566 F.3d at
290–92. The 1998 CBA does not define unpaid benefit contributions as plan assets, but under
the subsequent CBAs “employer contributions” become vested plan assets “at the time they
become due and owing.” The Funds assert Haldean need not have executed subsequent CBAs to
be bound by their terms, and as such the subsequent CBAs’ definition of plan assets governs the
Hale defendants’ liability.

8

An entity can adopt the terms of an unsigned CBA through its actions. See Brown v. C.
Volante Corp., 194 F.3d 351, 355–56 (2d Cir. 1999). The Brown court, and other courts in this
Circuit, have held the following behaviors established that the defendant employer adopted an
unsigned CBA: (i) signing a previous CBA; (ii) submission of remittance reports in accordance
with the terms of the CBAs over several years; (iii) submission to audits by the funds; (iv) and
payment of union wages. See id.; see also Inter Cty. Glass, Inc. v. Local Union 580 of the Int’l
Ass’n. of Bridge Structural and Ornamental Iron Workers, 2007 WL 2908094, at *4 (E.D.N.Y.
Sept. 28, 2007); Serv. Emps. Int’l Union, Local 32BJ v. Coby Grand Concourse, LLC, 2006 WL
692000, at * 4 (S.D.N.Y. Mar. 16, 2006).
Unlike the defendant in Brown, which submitted sixty-one remittance reports in
accordance with the terms of an unsigned CBA, Haldean submitted only two remittance reports
in the relevant time frame, and it is undisputed that the Funds did not audit Haldean between
2003 and July 2015. Further, although the Hale defendants paid employee wages consistent with
wage scales in the subsequent CBAs, it is undisputed that wage sheets reflecting increases
routinely were issued by Local 38 separate and apart from the subsequent CBAs. The Hale
defendants contend they relied on these wage sheets to set employee wages. Thus, it is not clear
the Hale defendants’ actions evidence intent to be bound by the subsequent CBAs.
Moreover, by virtue of its evergreen clause, the 1998 CBA renewed automatically when
it expired on April 30, 2002. The evergreen clause indicates the 1998 CBA will continue in full
force and effect unless written notice of reopening is given. It is uncontested that neither
Haldean nor Local 38 gave notice to reopen or terminate the 1998 CBA.
The Funds seem to assert the evergreen clause operates to bind Haldean to each
subsequent CBA executed by Local 38. Even if the Court were to accept the Funds’

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interpretation of the evergreen clause, it would not obviate Local 38’s obligation to provide
Haldean some form of notice of its intent to terminate or modify the 1998 CBA. Long Island
Head Start Child Dev. Servs. v. N.L.R.B., 460 F.3d 254, 259 (2d Cir. 2006) (finding that where
no notice of termination was given, negotiation between the parties of a new CBA did not
terminate a prior CBA containing an evergreen clause). There is no evidence to suggest Haldean
received such notice.
Likewise, the Funds’ reliance on Carpenters Health v. Mgmt. Res. Sys. Inc., 837 F.3d
378 (3d Cir. 2016), as authority to bind Haldean to the subsequent CBAs, is misplaced. In that
case, the defendant employer was a party to a “me-too” agreement that allowed a multi-employer
bargaining group to negotiate on its behalf. Here, there is no evidence Haldean was a party to
such a “me-too” agreement. And it is undisputed that Haldean was not a member of the multiemployer bargaining group known as SMACNA, which negotiated on behalf of other employers.
Moreover, there is no evidence that Haldean consented to SMACNA’s bargaining on its behalf,
participated in SMACNA’s negotiations with Local 38, or was aware of SMACNA’s
negotiations with Local 38. There is also no evidence Haldean was a member of any other multiemployer bargaining group.
Therefore, the Court finds the 1998 CBA governs Haldean’s relationship with the Funds.
See, e.g., The Tile Setters & Tile Finishers Union of N.Y. & N.J. v. Speedwell Design/BFK
Enter., LLC, 2009 WL 922021, at *13 (E.D.N.Y. Mar. 31, 2009) (finding plain language of
CBA’s evergreen clause did not bind employer to Union’s successor CBA when employer had
no notice of and did not participate in negotiation of successor CBA, did not sign successor
CBA, was not a member of the associations that negotiated the successor CBA, and did not

10

receive a copy of the successor CBA). 2 Haldean’s unpaid benefit contributions thus are not plan
assets for which the Hale defendants may be held liable as ERISA fiduciaries.
The Hale defendants concede that contributions in the amount of $213,720.72 were
withheld from Haldean employees’ wages but not remitted to the Funds, and therefore constitute
plan assets. (Haldean Br. at 14-15). Thus, to the extent the Hale defendants are fiduciaries
pursuant to ERISA (as discussed below), they may be held liable for those unremitted
contributions.
2.

The Hale Defendants’ Status As ERISA Fiduciaries

Defendants concede Florence Hale is an ERISA fiduciary. Thus, Florence Hale is
personally liable for plan assets Haldean failed to remit to the Funds.
Defendants contest Robert Hale’s status as an ERISA fiduciary, and the Court concludes
that issue cannot be resolved on summary judgment.
ERISA provides that a person is a fiduciary with respect to an ERISA benefit plan to the
extent “he exercises any discretionary authority or discretionary control respecting management
of such plan or exercises any authority or control respecting management or disposition of its
assets.” 29 U.S.C. § 1002(21)(A)(i). “Congress intended ERISA’s definition of fiduciary ‘to be
broadly construed’ . . . [and] functional.” LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir.
1997).

2

For similar reasons, the Court finds unavailing the Funds’ argument that trust agreements
external to the 1998 CBA, and unexecuted by Haldean, are a sufficient basis for concluding
unpaid benefit contributions are plan assets. With one exception, the agreements post-date the
1998 CBA. (Funds Br. Exs. 4-7). There is no evidence that Haldean was given notice that the
1998 CBA was amended or modified pursuant to these trust agreements. The Local 38 Labor
Management Committee and Trust Agreement (Funds Br. Ex. 3) apparently is from 1998.
Neither party makes any representation as to what month it was executed or whether Haldean
was ever aware of its existence. Accordingly, the Court is unable to assess its bearing on the
1998 CBA.
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In determining whether an individual defendant is liable as a fiduciary of ERISA plan
assets, courts analyze how much control the individual exercised over such assets. In making
this determination, courts look to several factors, “most significantly, whether a defendant was
responsible for authorizing and making payments to an employee benefits plan.” Trs. of the
Plumbers Local Union No. 1 Welfare Fund, et al. v. Philip Gen. Const., 2007 WL 3124612, at *5
(E.D.N.Y. Oct. 23, 2007) (internal quotation omitted). Courts in this Circuit have concluded this
definition includes individuals who exercise control over a company and fail to make benefit
contributions. See LoPresti v. Terwilliger, 126 F.3d at 40 (“Of equal if not more import, though,
is that [defendant] had a role in determining which bills to pay, in that he decided which creditors
were to be paid out of the Company's general account . . . and when those creditors were to be
paid.”) (internal quotation omitted); Trs. of the Road Carriers Local 707 Welfare Fund v.
Goldberg, 2009 WL 3497493, at *4 (E.D.N.Y. Oct. 28, 2009).
The Funds argue Robert Hale was a co-owner and fifty percent shareholder of Haldean,
and the signatory on all checks written on Haldean’s account, including three checks made
payable to the Funds in the relevant time frame. The Funds further argue Robert Hale worked in
Haldean’s offices every day, whereas Florence Hale was in poor health and regularly worked
from home. The Funds contend Robert Hale’s familiarity with Haldean’s finances is
demonstrated by the use of Haldean’s assets to repay a loan taken against Robert Hale’s annuity
plan.
Defendants argue the testimony of Haldean’s employees establishes Robert Hale worked
almost exclusively in the field on production, whereas Florence Hale was responsible for
Haldean’s administrative work, including determining which bills to pay and when. This is

12

supported by Wendy Santucci’s testimony that she communicated with Florence Hale and Peter
DeAngelis regarding Haldean’s unpaid benefit contributions, but never spoke to Robert Hale.
Based on the foregoing, the Court concludes that genuine issues of material fact
regarding Robert Hale’s control over Haldean’s assets preclude summary judgment.
B.

Liability Pursuant to Special Circumstances

The Funds next argue special circumstances warrant the imposition of personal liability
against the Hale defendants.
For the reasons that follow, the Court disagrees.
The Second Circuit has held that “special circumstances beyond an individual’s officer
status or corporate duties, might warrant the imposition of personal liability for a corporation's
ERISA obligations.” Sasso v. Cervoni, 985 F.2d 49, 50 (2d Cir. 1993). Special circumstances
include (i) acting in concert with a fiduciary to breach a fiduciary obligation; (ii) intermingling
personal and corporate assets; (iii) committing fraud; and (iv) where the individual is the
corporation or the corporation’s alter ego. Id.; see also Trs. of Bldg. Serv. 32B-J Pension, Health
& Annuity Funds v. Hudson Serv. Corp., 871 F. Supp. 631, 638 (S.D.N.Y. 1994).
1.

Piercing the Corporate Veil

The Funds seek to hold the Hale defendants personally liable through traditional veil
piercing.
To protect employee benefits under ERISA, courts in this Circuit “observe a general
federal policy of piercing the corporate veil when necessary.” Ret. Plan of UNITE HERE Nat'l
Ret. Fund v. Kombassan Holding. A.S., 629 F.3d 282, 288 (2d Cir. 2010). Although federal
common law determines whether the corporate veil may be pierced in connection with an ERISA
claim, state law may be used as a guide. See Goldberg v. Colonial Metal Spinning & Stamping

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Co., 1993 WL 361672, at *4 (S.D.N.Y. Sept. 14, 1993). Under New York law, a party seeking
to pierce the corporate veil and hold an individual liable for corporate action must make two
showings: “1) the owner exercised complete domination over the corporation with respect to the
transaction at issue, and 2) such domination was used to commit a fraud or wrong that injured the
party seeking to pierce the veil.” MAG Portfolio Consultant, GMBH v. Merlin Biomed Grp.
LLC, 268 F.3d 58, 63 (2d Cir. 2001) (internal quotation omitted).
In conducting a veil piercing analysis, courts may consider the following factors to
determine whether the first requirement, domination over the corporation, is met:
(1) the absence of the formalities and paraphernalia that are part and parcel of the
corporate existence, i.e., issuance of stock, election of directors, keeping of
corporate records and the like, (2) inadequate capitalization, (3) whether funds are
put in and taken out of the corporation for personal rather than corporate purposes,
(4) overlap in ownership, officers, directors, and personnel, (5) common office
space, address and telephone numbers of corporate entities, (6) the amount of
business discretion displayed by the allegedly dominated corporation, (7) whether
the related corporations deal with the dominated corporation at arms length, (8)
whether the corporations are treated as independent profit centers, (9) the payment
or guarantee of debts of the dominated corporation by other corporations in the
group, and (10) whether the corporation in question had property that was used by
other of the corporations as if it were its own.
William Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 139 (2d Cir.
1991). The veil piercing inquiry is fact intensive, and “disregarding corporate separateness is a
remedy that differs with the circumstances of each case.” Id. (internal quotation omitted).
To support a finding of domination, the Funds assert Haldean failed to observe the
formalities of corporate existence in that it did not hold annual meetings or elections of officers,
file tax returns during the relevant time frame, or timely pay payroll taxes. The Funds further
assert Haldean’s corporate funds were used for personal purposes, as Haldean paid rent to North
State Associates, a partnership co-owned by Robert Hale. Robert Hale thus arguably used
Haldean assets to build equity in a real estate investment, rather than making benefit

14

contributions. Haldean also made regular payments to Mass Mutual to repay a loan taken against
Robert Hale’s annuity.
The Hale defendants assert they did everything they could to keep Haldean afloat, and
paid creditors as necessary to keep the business operational. The Hale defendants argue Haldean
was a small, closely held corporation for which annual meetings and elections were not
necessary. The Hale defendants also state they took no salary or compensation from Haldean
during the relevant time frame; to the contrary, they infused personal funds, such as the loan
against Robert Hale’s annuity, into the business to their personal detriment.
The Funds offer scant evidence sufficient to meet the second prong of the inquiry. The
Funds argue Florence Hale offered Wendy Santucci certain benefits, including a Christmas
dinner and the use of Florence Hale’s house in Florida. Such generosity could suggest ill intent,
but it does not necessarily establish that the Hale defendants were deliberately abusing the
corporate form to avoid Haldean’s ERISA obligations. See, e.g., Burke v. Hamilton Equip.
Installers, Inc., 528 F.3d 108, 110 (2d Cir. 2008) (citing as a consideration in veil piercing
analysis a lack of evidence that the corporation was formed to avoid ERISA liability); Trs. of the
Local 813 Pension Tr. Fund v. Canal Carting, Inc., 2014 WL 843244, at *8 (E.D.N.Y. Mar. 4,
2014).
On this record, a reasonable fact finder could conclude veil piercing is warranted, but the
evidence is not sufficient to compel such a finding.
Accordingly, summary judgment is not appropriate on that basis.
2.

Fraudulent Conduct

The Funds next argue special circumstances are met because the Hale defendants
committed fraud.

15

As set forth below, the Court concludes the evidence is not sufficient to support a finding
of fraudulent conduct.
The Second Circuit has prescribed a two-part test to determine whether fraudulent
conduct subjects an individual to liability for a corporation’s ERISA violations. First, the
individual must be a “controlling corporate official.” Cement & Concrete Workers Dist. Council
Welfare Fund, Pension Fund, Legal Servs. Fund & Annuity Fund v. Lollo, 35 F.3d 29, 33 (2d
Cir. 1994), as amended (Sept. 9, 1994). Second, the conduct must rise to the level of common
law fraud. Id. “[T]o prove a fraud claim, [plaintiff] must demonstrate 1) a material false
representation or omission of an existing fact, 2) made with knowledge of its falsity, 3) with an
intent to defraud, and 4) reasonable reliance, 5) that damages plaintiff[s].” Id. (internal
quotation omitted).
The Funds assert the Hale defendants made misrepresentations or omissions sufficient to
support a finding of fraudulent conduct, including: the Hale defendants did not tell Haldean’s
employees that benefit contributions were not being paid; Florence Hale signed waivers of lien
falsely indicating Haldean’s employees were paid a certain wage plus benefits; Florence Hale
obtained letters from the Funds’ office stating Haldean was in good standing and used them to
get paid for jobs; and Florence Hale caused Haldean employees to be taxed on vacation pay that
was not remitted to the Funds.
These alleged misrepresentations and omissions are insufficient to establish common law
fraud, as they were made to third parties, and there is no evidence the Funds relied on them. See
Cement & Concrete Workers Dist. Council Welfare Fund v. Lollo, 148 F.3d 194, 196 (2d Cir.
1998) (“We hold that a plaintiff does not establish the reliance element of fraud for purposes of

16

ERISA or New York law by showing only that a third party relied on a defendant’s false
statements.”).
Likewise, the Funds’ argument that the Hale defendants’ conduct amounts to fraudulent
concealment is unavailing. To establish a claim of fraudulent concealment, the Funds must show
they relied on a misrepresentation or omission. See Catalano v. BMW of N. Am., LLC, 2016
WL 3406125, at *3 (S.D.N.Y. June 16, 2016). Again, there is no evidence the Funds relied on
the Hale defendants’ misrepresentations to third parties, and in light of Florence Hale’s multiple
conversations with Wendy Santucci, there is no basis to conclude the Hale defendants concealed
their non-payment from the Funds.
3.

Alter Ego Liability

Pursuant to the special circumstances doctrine, the same evidence that could support veil
piercing could also support the imposition of alter ego liability on the Hale defendants. In
Lowen v. Tower Asset Management, the Second Circuit stated it would set aside the corporate
form where “where exacting obeisance to the corporate form is inconsistent with ERISA's
remedial purposes.” 829 F.2d 1209, 122–21 (2d Cir. 1987). In the ERISA context, the alter ego
inquiry “generally gives less deference to the corporate form than does the strict alter ego
doctrine of state law.” Id. at 1220. In Lowen, the intermixing of assets among corporations and
individuals, a lack of appropriate management formalities, inadequate capitalization, and the
domination of the corporation by individual defendants manifested a disregard of the corporate
form. Id. at 1221.
Although the Funds have presented sufficient evidence to support a finding of personal
liability on an alter ego theory, summary judgment is not appropriate because there are genuine
issues of material fact. For instance, the parties should have the opportunity to present evidence

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concerning Haldean’s use of the proceeds of the loan from Robert Hale’s annuity, or Haldean’s
observance of corporate formalities other than shareholders meetings or elections.
Accordingly, summary judgment that special circumstances warrant the imposition of
personal liability on the Hale defendants is not appropriate.
CONCLUSION
Defendants’ motion for summary judgment is GRANTED as to whether Haldean’s
unpaid benefit contributions are plan assets (except to the extent they were actually withheld
from employees’ wages but not remitted to the Funds), and DENIED in all other respects.
Plaintiffs’ cross-motion for summary judgment is GRANTED as to (i) Haldean’s
liability for unpaid benefit contributions, and (ii) Florence Hale’s status as an ERISA fiduciary.
Plaintiffs’ cross-motion is DENIED in all other respects.
All counsel are directed to appear at a status conference on December 22, 2017 at 10:30
a.m., at which time the Court will set a trial date and a schedule for pretrial submissions.
By December 21, 2017, the parties shall submit a Joint Pretrial Order in accordance with
the Court's Individual Practices.
The Clerk is instructed to terminate the motion. (Doc. #110).
Dated: November 21, 2017
White Plains, NY
SO ORDERED:

____________________________
Vincent L. Briccetti
United States District Judge

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