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BOURGAL v. ROBCO CONTR. ENTERPRISES

June 27, 1997

MICHAEL BOURGAL, JOHN PROBEYAHN, THEODORE KING, CHESTER BROMAN, BEN CIAVOLELLA, JR., FRANK FINKEL, JOSEPH FERRARA and ANIELLO MADONNA as Trustees and Fiduciaries of the Local 282 Welfare, Pension, Annuity and Job Training Trust Funds, Plaintiffs,
v.
ROBCO CONTRACTING ENTERPRISES, LTD., FERRAIOLI INDUSTRIES, INC., DANA-SAL EQUIP. CORP., ROBERTA DEFILLIPIS, and SAL FERRAIOLI, Defendants.



The opinion of the court was delivered by: SPATT

 SPATT, District Judge:

 This lawsuit arises as a result of the alleged failure of the defendants Robco Contracting Enterprises, Ltd. ("Robco"), Ferraioli Industries, Inc. ("Industries"), Dana-Sal Equipment Corp. ("Dana-Sal," the "corporate defendants"), Roberta Defilippis ("Defilippis") and Sal Ferraioli ("Ferraioli," the "individual defendants" collectively the "defendants"), to pay benefit contributions to the Local 282 Welfare, Pension, Annuity and Job Training Funds as required pursuant to the terms of the relevant collective bargaining agreement and trust agreement. The plaintiffs, Michael Bourgal, John Probeyahn, Theodore King, Chester Broman, Ben Ciavolella, Jr., Frank Finkel, Joseph Ferrara and Aniello Madonna (collectively the "plaintiffs" or the "Funds"), have brought this action as Trustees and Fiduciaries on behalf of the benefit funds pursuant to the Labor Management Relations Act, section 301, 29 U.S.C. § 185 and the Employee Retirement Income Security Act ("ERISA"), sections 502 and 515, 29 U.S.C. §§ 1132 and 1145.

 Presently before the Court is the plaintiffs' motion for summary judgment pursuant to Fed. R. Civ. P. 56. According to the Funds, the corporate defendants are jointly and severally liable for delinquent benefits contributions plus interest and attorneys' fees "by virtue of their 'alter ego,' 'single employer' and/or 'double-breasted' relationship." Further, the plaintiffs assert that the individual defendants should be held personally liable for the contributions because they "attempted to defraud the Funds by, inter alia, use of the foregoing corporations." Only the defendants Robco and Defilippis have responded to the Funds' motion arguing that there are sufficient issues of material fact to warrant denial of summary judgment.

 I. Background

 A. The facts

 The Funds are employee benefit plans within the meaning of ERISA, 29 U.S.C. § 1002(3), and are maintained pursuant to the terms of collective bargaining agreements ("Agreement") between the Building Material Teamsters Local 282, affiliated with the International Brotherhood of Teamsters, AFL-CIO (the "Union") and various employers. The Funds are operated pursuant to the terms of the Agreement and an Agreement and Declarations of Trust (the "Trust Agreement") incorporated into the collective bargaining agreement by reference. The Trust Agreements set forth the rules under which the Funds are administered.

 Robco and Dana-Sal are in the excavation business, transporting material such as dirt, debris and asphalt by truck, to and from construction sites. The parties disagree as to Industries' operations. The Funds contend that Industries is also in the excavation business. The defendants argue that Industries supplies "roll off" containers for rubbish removal, a separate enterprise. According to the Funds, all three corporate defendants maintained their offices at the same address, 23 Ash Street in Brooklyn, New York until August 1992 when Robco began dispatching trucks from a yard located in College Point, New York.

 Defilippis is the president of Robco. Ferraioli is Defilippis's husband and is the president and chief executive officer of Industries and the only principal of Dana-Sal. He also runs the day to day operations of Robco, including managing labor relations and controlling payroll practices.

 Robco was a signatory to the collective bargaining agreement with the Union for the period from July 1, 1991 through June 30, 1993. The Agreement bound Robco to the terms of the Trust Agreement which required Robco to submit monthly remittance reports regarding the hours worked by covered employees and the contributions owed to the Funds as a result. Industries was a party to an identical Agreement with the Union effective December 1, 1990 through June 30, 1993. Dana-Sal was not a party to the Agreement. From the effective date of its Agreement, Industries failed to supply any remittance reports to the Funds.

 The Funds claim that the corporate defendants are operated as a single employer, alter egos and constitute a double breasted operation. According to the plaintiffs, Robco, Industries and Dana-Sal, shared common ownership, management and supervision, namely Ferraioli and Defilippis; shared common facilities and equipment; had interrelated operations; shared common customers; and maintained centralized labor relations. For example, the corporate defendants shared employees, such as Ralph Montchal and Tommy Tenza, who worked as dispatchers for Dana-Sal, Industries and Robco. In addition, covered employees who performed work for Robco were paid by all three corporate defendants. All three companies shared customers including companies known as "Cousins-Civetta," "New York Paving," "Pile Foundation Construction Co., Inc." and "Perez Interboro Asphalt Co., Inc." They also shared employees, and used their equipment on the same construction sites.

 One example of the interrelationship between the corporate defendants is with respect to a contract between Robco and Perez Interboro Asphalt Co. to perform "unclassified excavation work on the 14th Street Reconstruction Project" in Manhattan. The contract was executed by Defilippis on behalf of Robco and included work covered by the collective bargaining agreement. Dump trucks bearing the name "Ferraioli Industries" or "Dana-Sal Equipment" were used to perform work on the 14th Street Reconstruction Project between July 2, 1991 and July 17, 1991. On July 17, 1991, those trucks were chased off the site by a shop steward. The same trucks appeared the next day with a new sign on the vehicles reading "Robco Contracting Enterprises, Ltd." The trucks were then used to perform the same work as before with some of the same drivers.

 The plaintiffs also claim that Defilippis and Ferraioli commingled their personal funds with the assets of the corporate defendants and diverted corporate assets for non-corporate uses. According to the Funds, the corporate defendants do not issue stock certificates to shareholders, do not maintain corporate bylaws, do not maintain shareholder meetings or board of directors meetings and do not maintain separate books and records.

 On the other hand, the defendants Robco and Defilippis deny that the corporate defendants are maintained as a single employer or alter-egos. In support of their position, they claim that the companies were formed at different times, maintain different offices and have different functions. For example, as stated above Robco is located in College Point, and Dana-Sal and Industries are located at 23 Ash Street in Brooklyn. Industries supplies "'roll-off' containers for rubbish removal" as opposed to operating "excavation businesses" like Robco and Dana-Sal. Further, Robco was financed by Defilippis' family as opposed to Ferraioli, who only managed that company's "day-to day operations." Also, Robco's books and records were kept separately from Dana-Sal and Industries. According to Defilippis, she was not involved in any way with the operation of her husband's companies, Industries and Dana-Sal, although, as stated above, she confirms that Ferraioli was hired to operate Robco on a daily basis. Further, Defilippis denies defrauding the Funds "through knowing falsification of remittance reports." In preparing the reports she relied exclusively on information given to her by Ferraioli and Ralph Montchal, Robco's dispatcher.

 B. Procedural history

 On June 15, 1993, the Funds filed their Complaint alleging five causes of action: (1) against Robco for failure to pay benefits contributions; (2) against Roberta Defilippis individually for fraudulently underreporting hours worked and making cash payments to employees in an effort to avoid paying benefits contributions; (3) against Robco, Industries and Dana-Sal as a single employer and alter egos such that Industries and Dana-Sal are jointly and severally liable for Robco's delinquent contributions; (4) against Robco for contributions based on employees of Dana-Sal for the period from July 1991 through December 1991, as a result of Dana-Sal's operation as a double breasted entity in violation of Robco's obligations under the collective bargaining agreement; and (5) against Ferraioli for intentionally causing Robco to underreport hours worked by the employees thereby causing underpayment of contributions to the Funds. On October 25, 1993, the defendants served their Answers denying liability.

 On September 3, 1993, the Funds commenced discovery by serving Plaintiffs' First Request for Production of Documents upon Robco and Defillipis and simultaneously noticing the deposition of Defillipis for October 4, 1993. On October 4, 1993, Plaintiffs' First Request for Production of Documents was served on the remaining defendants. That day Ferraioli appeared at the deposition noticed for his wife. At this time, some records of Dana-Sal and Robco were produced. Ferraioli also represented that many of the records relating to Dana-Sal and Industries were taken by the United States Attorney's office for a related criminal investigation. However, he did state that he would obtain copies of these documents and turn them over to the Funds. No copies were ever produced.

 During his deposition, Ferraioli stated that he was appearing on his own behalf. The deposition was eventually continued to October 7, 1993 and then adjourned at the defendant's request until October 18, 1993.

 On July 8, 1994, the parties met with Judge Orenstein to address the defendants' responses to the Funds' discovery demands. Judge Orenstein ordered the defendants to produce and serve the documents demanded by July 25, 1994 and, over the defense counsel's objection, that Robco's accountant be deposed. The individual defendants were directed to appear for depositions on August 9 and 10, 1994.

 On July 27, 1994 and July 29, 1994 the Funds received communications stating that the defendants were searching for additional documents. No documents were received from Dana-Sal, Industries and Ferraioli. In addition, counsel for Defillipis sent a letter stating that Defillipis had prepared a list of records she had found, as well as those she was unable to find, which list was allegedly enclosed. The list was not enclosed. The letter further stated that Defillipis gave the additional records to her husband to deliver to counsel. However, while the records were in her husband's car, allegedly the car was stolen.

 On August 9, 1994, at their depositions, the individual defendants prevented the Funds from obtaining necessary information and evidence by invoking their Fifth Amendment privilege against self incrimination, the marital privilege and spousal immunity. On August 15, 1994, the plaintiffs notified the defendants that they would attempt to continue the depositions. By letter dated August 16, 1994, counsel for Robco objected to continuing the depositions. Based on these objections, and defense counsel's representations that Ferraioli and Defillipis intended to continue to invoke the aforementioned privileges, the parties' attorneys agreed that the Funds would submit a list of questions to the defendants. If the defendants chose to invoke the ...


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