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Division 1181 Amalgamated Transit Union v. New York City Department of Education

United States District Court, S.D. New York

August 30, 2017



          P. Kevin Castel United States District Judge.

         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. BACKGROUND.

         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. ¶ 38.)

         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. ¶¶ 39-40.) 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. ¶¶ 41-51.)

         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. ¶ 56.)

         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 ¶¶ 104-545; 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 “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. 1-800 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. DISCUSSION.

         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). Alter-ego 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 288.

         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 ...

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