Cement and Concrete Workers Dist. Council Welfare Fund, Pension Fund, Legal Services Fund and Annuity Fund v. Lollo

• Decision Date: 09 September 1994
• Docket Number: Nos. 941,D,1142,s. 941
• Citation: 35 F.3d 29
• Parties: 147 L.R.R.M. (BNA) 2409, 129 Lab.Cas. P 11,222 CEMENT AND CONCRETE WORKERS DISTRICT COUNCIL WELFARE FUND, PENSION FUND, LEGAL SERVICES FUND AND ANNUITY FUND; William R. Soracco, in his fiduciary capacity as Administrator of the Cement and Concrete Workers District Council Welfare Fund, Pension Fund, Legal Services Fund and Annuity Fund; and Thomas Madera, as President of the Cement and Concrete Workers District Council, Plaintiffs-Appellees/Cross-Appellants, v. Steven R. LOLLO and Jeffrey E. Lollo, Defendants-Appellants/Cross-Appellees, Peter Lollo; John A. Lollo; Lawrence Lollo; Gerard M. Lollo; and Jeffrey E. Lollo as Personal Representative of Anthony F. Lollo, Deceased, Defendants/Cross-Appellees. ockets 93-7845, -93-7847.
• Court: U.S. Court of Appeals — Second Circuit

Page 29

35 F.3d 29

147 L.R.R.M. (BNA) 2409, 129 Lab.Cas. P 11,222

CEMENT AND CONCRETE WORKERS DISTRICT COUNCIL WELFARE FUND,

PENSION FUND, LEGAL SERVICES FUND AND ANNUITY FUND; William

R. Soracco, in his fiduciary capacity as Administrator of

the Cement and Concrete Workers District Council Welfare

Fund, Pension Fund, Legal Services Fund and Annuity Fund;

and Thomas Madera, as President of the Cement and Concrete

Workers District Council, Plaintiffs-Appellees/Cross-Appellants, v. Steven R. LOLLO and Jeffrey E. Lollo,

Defendants-Appellants/Cross-Appellees,

Peter Lollo; John A. Lollo; Lawrence Lollo; Gerard M.

Lollo; and Jeffrey E. Lollo as Personal

Representative of Anthony F. Lollo,

Deceased, Defendants/Cross-Appellees.

Nos. 941, 1142, Dockets 93-7845, -93-7847.

United States Court of Appeals, Second Circuit.

Argued Jan. 10, 1994.

Decided June 16, 1994.

Amended Opinion Filed After

Petition for Rehearing Sept. 9, 1994.

Andrew C. Morganstern, Mineola, NY, for defendants-appellants/cross-appellees.

Joseph S. Kaming, New York City (Elizabeth C. Kaming, Sean O'Donnell, Kaming & Kaming, of counsel), for plaintiffs-appellees/cross-appellants.

Douglas A. Cooper, New Rochelle, NY (Deborah R. Beckman, Cooper & Cooper, of counsel), for amicus curiae, Frederick DeMatteis and Richard DeMatteis.

Before: WINTER, WALKER, and JACOBS, Circuit Judges.

WALKER, Circuit Judge:

Defendants Steven and Jeffrey Lollo appeal from a judgment of the United States District Court for the Eastern District of New York (Eugene H. Nickerson, Judge) holding them individually liable for violating the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sec. 1001 et seq. ("ERISA"), and for breaching a collective bargaining agreement based on their actions as officers of a corporation that failed to pay ERISA contributions and union dues check-off monies. The president of the union, its ERISA funds, and the funds' administrator cross-appeal from that part of the judgment which ruled that other corporate officials could not be held personally liable under the collective bargaining agreement. We reverse the part of the judgment that holds Steven Lollo liable for violating ERISA, affirm the part of the judgment that holds Jeffrey Lollo responsible for non-payment under the parties' 1987 collective bargaining agreement, and remand for further proceedings consistent with this opinion.

BACKGROUND

Plaintiffs consist of the President of the Cement and Concrete Workers District Council (the "Union"), several of the Union's ERISA funds (the "Funds"), and the Administrator of the Funds. Defendants are seven individuals who operated and were employed by a family construction business first known as Gerard Lollo & Sons, Inc., and then as Lollo Brothers, Inc. ("Lollo, Inc."). Anthony F. Lollo, now deceased, was the President and a 51% shareholder of Lollo, Inc. His brother Lawrence owned the remaining 49% of the company and served as its Vice President. A third brother, Peter, acted as Lollo, Inc.'s bookkeeper and was either an actual or de facto treasurer. Anthony Lollo's two sons, Steven and Jeffrey, were also intimately involved in the family business. Jeffrey became president of the company in July 1987 when his father retired; Steven acted as a vice president, although there is dispute over whether he actually held this title. Although listed as defendants, Gerard Lollo, Jeffrey and Steven's grandfather, and John Lollo, their brother, never became involved Plaintiffs brought this suit seeking to hold defendants personally liable for unpaid contributions owed to the Funds and union dues owed to the Union under collective bargaining agreements entered into between Lollo, Inc. and the Union for the periods from July 1, 1984 to June 30, 1987 (the "1984 CBA") and from July 1, 1987 to June 30, 1990 (the "1987 CBA"). Both agreements provided that Lollo, Inc., as an employer under ERISA, would contribute to the Funds based on employee work hours and would honor employees' decisions to have union "check-off" dues withheld from their paychecks and turned over directly to the Union. Plaintiffs' complaint alleges that defendants breached the collective bargaining agreements, committed fraud, misappropriated plaintiffs' funds, violated ERISA, and engaged in a pattern of racketeering activity aimed at depriving the Funds and Union of monies in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sec. 1961 et seq.

in this case and all claims against them were voluntarily dismissed.

Plaintiffs moved for summary judgment on the first count of their complaint pertaining to the 1984 CBA against Steven and Anthony Lollo, and on the second count pertaining to the 1987 CBA against all of the Lollo defendants save Gerard and John. Steven appeals from the district court's grant of summary judgment on count one holding him liable for Lollo, Inc.'s obligations to the Funds under the 1984 CBA. Jeffrey appeals from summary judgment holding him liable for Lollo, Inc.'s obligations to the Union and the Funds under the 1987 CBA. Plaintiffs cross-appeal from the court's grant of summary judgment in favor of Peter, Lawrence, Steven, and Anthony Lollo (whose estate is now represented by Jeffrey Lollo) exonerating them from liability on plaintiffs' claim under the 1987 CBA.

DISCUSSION

In order to prevail on a motion for summary judgment, the moving party must show that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). In deciding such a motion, the district court "must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor." Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 572 (2d Cir.1993). We review a district court's grant of summary judgment de novo. Westinghouse Elec. Corp. v. New York City Transit Auth., 14 F.3d 818, 821 (2d Cir.1994).

I. The Claim Under the 1984 CBA

Plaintiffs' first claim is denominated as the "Fund's Claim Against Individual Defendants as Employers." The district court construed this as a cause of action by plaintiff Soracco, as a fiduciary of the Funds, under Sec. 515 of ERISA, 29 U.S.C. Sec. 1145, to hold Steven and Anthony Lollo responsible for defrauding the Funds of contributions owed under the 1984 CBA. In ruling on this claim, the district court found it to be undisputed that from August 1986 to June 1987, in connection with a construction project on which Union members had worked, Steven Lollo submitted to a general contractor, R.G. Madison Corp., payment requisition forms that falsely stated that no money was owed to the Funds under any collective bargaining agreement. The district court further found that Steven and Anthony both knew that these submissions were false; that by making these false submissions, Steven and Anthony obtained several million dollars in payments for the corporation; and that no money was withheld from these payments to cover contributions owed to the Funds. Relying on Leddy v. Standard Drywall, Inc., 875 F.2d 383 (2d Cir.1989), the district court held both Steven and Anthony liable for amounts due to the Funds for this time period. On appeal, Soracco pursues judgment on this claim only against Steven.

In Leddy, we held that "to the extent that a controlling corporate official defrauds or conspires to defraud a benefit fund of required contributions, the official is individually liable under Section 502 of ERISA, 29 U.S.C. Sec. 1132." Id. at 388. The district court held Steven liable under this standard The first question is whether Steven qualified as a "controlling corporate official." Leddy does not provide a clear test for determining who fits this description. Rather, that decision, the first in this circuit to hold a corporate officer responsible for his company's unpaid ERISA contributions, relied upon cases under the Fair Labor Standards Act that imposed liability on "a corporate officer with operational control who is directly responsible for a failure to pay statutorily required wages." Id. at 387. Drawing from this standard, we proceeded to impose liability on a corporate officer who was a president and shareholder of his company and who acknowledged his culpability for the corporation's wrongdoings by pleading guilty to an indictment charging him with conspiring with the company to defraud an ERISA fund of contributions owed under a collective bargaining agreement. We justified our decision by noting that the defendant had deliberately flouted ERISA obligations and did not deserve the protection of the corporate form. Id. at 388.

because the undisputed facts established that (1) he acted as a vice president of Lollo, Inc., and (2) he submitted requisition payment forms to a general contractor that falsely stated that all outstanding claims for union benefits had been paid in full. We disagree with the district court's conclusion that these facts, without further support, are sufficient to hold Steven liable under Leddy.

In this case, the district court held that individual liability attached to Steven because he served as a company vice president with authority to sign checks on behalf of Lollo, Inc. However, as we held in Sasso v. Cervoni, 985 F.2d 49, 50 (2d Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 2964, 125 L.Ed.2d 664 (1993), an individual cannot be held "liable for corporate ERISA obligations solely by virtue of his role as officer, shareholder, or manager." Beyond his status within the corporate structure, the district court must examine the officer's actual role in the company's affairs and relationship to the company's wrongdoing.

The facts pertaining to these additional issues are sharply disputed. While Soracco alleges that Steven was a principal of Lollo, Inc. with direct responsibility for the company's...