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Trustees of Mosaic and Terrazzo Welfare v. High Performance Floors, Inc.

United States District Court, E.D. New York

February 9, 2017

HIGH PERFORMANCE FLOORS, INC., a New York Corporation, HIGH PERFORMANCE FLOORS, INC., a New Jersey Corporation, HPF, INC., 2 MAIN STREET, L.L.C, and 40 PARK PLACE LLC, Defendants.


          STEVEN M. GOLD United States Magistrate Judge.


         Plaintiffs, Trustees of the Mosaic and Terrazzo Welfare, Pension, Annuity and Vacation Funds and Trustees of the Bricklayers & Trowel Trades International Pension Fund (the “Funds”), bring this action pursuant to Section 502(a)(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended 29 U.S.C. § 1132(a)(3), and Section 3401 of the Labor Management Relations Act of 1947 (“LMRA”), as amended 29 U.S.C. § 185. Plaintiffs seek to collect employer contributions they contend are owed to a group of employee benefit funds for covered work performed by employees of defendant HPF, Inc. (“HPF”).

         Defendants High Performance Floors, Inc., a New Jersey corporation, and High Performance Floors, Inc., a New York corporation (collectively “High Performance”), are signatories to a collective bargaining agreement (the “CBA”) that requires contributions to the plaintiff Funds. Plaintiffs contend that HPF is an alter ego of, or single employer with, High Performance, that the labor performed by HPF is as a result governed by the CBA, and that contributions to the Funds are therefore due and owing for the covered work performed by HPF employees.

         The parties consented to the assignment of this case to a magistrate judge for all purposes pursuant to 28 U.S.C. § 636(c) and Federal Rule of Civil Procedure 73. Docket Entry 34. A non-jury trial limited to the question of liability was held over the course of three days in October 2016. The Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52 are set forth in narrative form below. See 9 Moore's Federal Practice § 52.13[1].

         Factual Background

         Plaintiffs are trustees of the Mosaic and Terrazzo Welfare, Pension, Annuity and Vacation Funds and the Bricklayers and Trowel Trades International Pension Fund. Compl. ¶¶ 4-5, Docket Entry 1. These funds were established pursuant to the terms of collective bargaining agreements entered into between the Mosaic, Terrazzo and Chemical Product Decorative Finisher Masons Workers Association Local No. 7 of New York, New Jersey & Vicinity (“Local 7”) and various employers. Compl. ¶ 14. Local 7 is a union whose members are tile, marble, and terrazzo workers. Tr. 34:14-16.[1]

         Guy Balzano, the principal of High Performance, founded the company in December 1991. Tr. 361:5-9. High Performance is in the business of floor installation, and its primary contract is with Stonhard, Inc. (“Stonhard”), a resinous floor vendor that engages companies like High Performance to install its products. Tr. 361:10-362:9. High Performance is a signatory to the CBA that requires contributions to the plaintiff Funds for covered work.

         The CBA defines covered work as, among other things, various types of tile, ceramic, and resinous flooring installation performed in specified counties of New York and New Jersey. Pls.' Trial Ex. V, at Arts. II and IV. A schedule attached to the CBA provides that, at least from 2009-2010, employers who are signatories were required to contribute $28.06 per hour of covered work to the plaintiff Funds.[2] Pls.' Trial Ex. V, at 31-32. Balzano testified that he understood the CBA to require benefit fund contributions for all covered work performed by High Performance, regardless of whether the owner or general contractor for a particular job required that the work be performed with union labor. Tr. 383:6-384:9.

         The principal of defendant HPF, at least in name, is Harold Sofield, who opened the company in May of 2012. Tr. 233:8-16. HPF is not a signatory to the CBA. Plaintiffs, though, contend that HPF was in fact formed by Balzano as a vehicle for performing covered work for owners or general contractors who did not require union labor, without making the benefit fund contributions that would otherwise be required by the CBA. Plaintiffs further argue that High Performance and HPF are alter egos and constitute a single employer, and that they are as a result jointly and severally liable to pay contributions for covered work, even if that work was performed through HPF.

         Legal Standards

         I. Alter Ego Liability

         The alter ego doctrine “is designed to defeat attempts to avoid a company's union obligations through a sham transaction or technical change in operations.” Local One, Amalgamated Lithographers of Am. v. Stearns & Beale, Inc., 812 F.2d 763, 772 (2d Cir. 1987). If entities are determined to be alter egos of each other, “‘then each is bound by the collective bargaining agreements signed by the other, ' and ‘thereby obligated to honor the pension [and welfare benefit] contributions terms' of the agreement.” Plumbers, Pipefitters and Apprentices Local Union No. 112 Pension, Health and Educational and Apprenticeship Plans v. Mauro's Plumbing, Heating and Fire Suppression, Inc. (“Mauro's Plumbing”), 84 F.Supp.2d 344, 349 (N.D.N.Y. 2000) (quoting Lihli Fashions Corp., Inc. v. N.L.R.B., 80 F.3d 743, 748 (2d Cir. 1996)). To determine whether two companies are alter egos, courts “focus[] on commonality of (i) management, (ii) business purpose, (iii) operations, (iv) equipment, (v) customers, and (vi) supervision and ownership” between the subject entities. N.Y. State Teamsters Conference Pens. & Ret. Fund v. Express Servs., Inc., 426 F.3d 640, 649 (2d Cir. 2005), (quoting Newspaper Guild of N.Y. v. N.L.R.B., 261 F.3d 291, 294 (2d Cir. 2001)); see also Local One Amalgamated Lithographers of Am., 812 F.2d at 772.

         II. Single Employer Liability

         A. Single Employer

         The N.L.R.B. developed the single employer doctrine, “which treats two nominally independent enterprises as a single employer, in order to protect the collective bargaining rights of employees.” Murray v. Miner, 74 F.3d 402, 404 (2d Cir. 1996). An entity that has signed a CBA and one that has not will be held jointly and severally liable for the signatory's obligations under the CBA if the single employer test is satisfied and the two entities “together [] represent an appropriate employee bargaining unit.” Lihli Fashions Corp., 80 F.3d at 747.

         The alter ego and single employer doctrines “are ‘conceptually distinct.' The focus of the alter ego doctrine, unlike that of the single employer 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.'” Lihli Fashions Corp., 80 F.3d at 748. The single employer doctrine, in contrast, focuses on determining if the entities “are part of a single integrated enterprise, ” and is “characterized by absence of an arm's length relationship found among unintegrated companies.” Id. at 747 (internal quotation marks omitted).

         Whether two entities constitute a “single employer” is determined by four factors enumerated by the Supreme Court: (1) interrelation of operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership. United Union of Roofers, Waterproofers, Allied Workers, Local No. 210, AFL-CIO v. A.W. Farrell & Son, Inc. (“United Union of Roofers”), 2012 WL 4092598, at *9 (W.D.N.Y. Sept. 10, 2012) (citing Radio & Television Broad. Technicians Local Union 1264 v. Broad. Serv. of Mobile, Inc., 380 U.S. 255, 256 (1965) (per curiam)). See also South Prairie Constr. v. Local No. 627, Intern. Union of Operating Eng'rs, AFL-CIO, 425 U.S. 800, 802-803 (1976) (per curiam)). The Second Circuit has held that two additional factors are properly considered as well: (5) use of common office facilities and equipment and (6) family connections between or among the various enterprises. United Union of Roofers, Waterproofers, and Allied Workers Local No. 210, AFL-CIO v. A.W. Farrell & Son, Inc. (“A.W. Farrell & Son, Inc.”), 547 Fed.Appx. 17, 19 (2d Cir. 2013) (quoting Lihli Fashions Corp., 80 F.3d at 747).

         “Ultimately, single employer status depends on all the circumstances of the case;” no one factor is dispositive and not all factors must be present. Lihli Fashions Corp., 80 F.3d at 747 (quoting N.L.R.B. v. Al Bryant, Inc., 711 F.2d 543, 551 (3d Cir. 1983)). Control of labor relations, however, is “central.” A.W. Farrell & Son, Inc., 547 Fed.Appx. at 19 (quoting Murray, 74 F.3d at 404). See also Trs. of Empire State Carpenters v. Dykeman Carpentry, Inc., 2014 WL 976822, at *3 (E.D.N.Y. Mar. 12, 2014).

         B. Single Bargaining Unit

         A finding that two entities constitute a single employer is a necessary but not a sufficient condition for imposing joint and several liability. In addition, the employees of the two entities must constitute a single bargaining unit. See Brown v. Sandimo Materials, 250 F.3d 120, 128 n.2 (2d Cir. 2001); Lihli Fashions Corp., 80 F.3d at 747-748; Local One Amalgamated Lithographers of Am., 812 F.2d at 769.

         When analyzing whether the employees of two different entities constitute a single bargaining unit, consideration “shifts from the control, structure and ownership of the employer to the community of interests of the employees.” Ferrara v. Oakfield Leasing Inc., 904 F.Supp.2d 249, 264 (E.D.N.Y. 2012) (quoting Cuyahoga Wrecking Corp. v. Laborers Int'l Union of North Am., Local Union # 210, 644 F.Supp. 878, 882 (W.D.N.Y. 1986)). Courts “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 128 n.2 (citations omitted).

         Courts in this district have found that employees comprise a single bargaining unit where the “contributions sought [were] for the same job classification . . . and for the same type of work, ” Bourgal v. Robco Contracting Enterprises, Ltd., 969 F. Supp. 854, 863 (E.D.N.Y. 1997), and where that same type of work is performed in the same geographical area, Ferrara, 904 F.Supp.2d at 264. A single appropriate bargaining unit may also be found where “the companies exchanged employees, the working conditions were the same at both companies, and the employees performed the same job” at both companies. LaBarbera v. C. Volante Corp., 164 F.Supp.2d 321, 326 (E.D.N.Y. 2001).

         III. Burden of Proof

         Defendants argue that plaintiffs must prove the elements of alter ego and single employer status by clear and convincing evidence, because each in essence involves an allegation of fraud. Defendants' Pretrial Memorandum (“Defs.' Mem.”) at 7-9, Docket Entry 42. While defendants concede they have uncovered no Second Circuit case law on the issue, they rely upon a decision of the Third Circuit holding that because “alter ego is akin to and has elements of fraud, ” it “must be shown by clear and convincing evidence.” See Kaplan v. First Options, 19 F.3d 1503, 1522 (3d Cir. 1994). See also Trustees of Nat. Elevator Industry Pension, Health Benefit and Educational Funds v. Lutyk, 332 F.3d 188, 194 (3d Cir. 2003) (quoting Kaplan, 19 F.3d at 1522).[3]

         The precedents on which defendants rely are at least arguably distinguishable, because each involves the more commonplace question of whether a court should “pierce the corporate veil” and hold an individual accountable for the debts of a corporation. Although similar, the alter ego doctrine invoked by plaintiffs here differs from traditional “veil-piercing” analysis in that it revolves around the avoidance of obligations imposed by a CBA. See Ret. Plan of the UNITE HERE Nat'l Ret. Fund v. Kombassan Holdings A.S., 629 F.3d 282, 288 (2d Cir. 2010).

         Moreover, precedent from within the Second Circuit suggests that only a preponderance of the evidence is required to establish alter ego or single employer status. In one case involving defendants alleged to be both alter egos and a single employer for the purposes of evading union obligations, a bench trial was held and the court, in rejecting single employer liability, noted that “plaintiffs have failed to establish by a preponderance of the evidence that RCS is the alter ego of AWF, or that AWF and RCS constitute a single employer.” United Union of Roofers, 2012 WL 4092598, at *16 (emphasis added). The Second Circuit affirmed, noting in dicta that, “plaintiffs do not dispute that they bore the [preponderance of the evidence] burden of proof at trial.” A.W. Farrell & Son, Inc., 547 Fed. App'x. at n.2.

         Were I required to decide, I would conclude that plaintiffs may establish alter ego or single employer status by a preponderance of the evidence. I reach this conclusion because the public policy concerns underlying ERISA are substantial, leading courts to adopt a “test of alter ego status [that] is flexible, allowing courts to weigh the circumstances of the individual case.” Gesualdi v. Juda Constr., Ltd., 2011 WL 5075438, at *8, (S.D.N.Y. Oct. 25, 2011) (quoting Kombassan Holding A.S., 629 F.3d at 288). This flexibility is available so that courts may “observe a general federal policy of piercing the corporate veil when necessary” to protect employee benefits. Kombassan Holding A.S., 629 F.3d at 288 (quotation marks and citations omitted). Thus, “[c]ourts have without difficulty disregarded form for substance where ERISA's effectiveness would otherwise be undermined.” Lowen v. Tower Management, Inc., 829 F.2d 1209, 1220 (2d Cir. 1987). Moreover, when determining either alter ego or single employer status, no one factor is ...

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