N.Y. State Teamsters v. Express Services

• Decision Date: 12 October 2005
• Docket Number: Docket No. 04-3237-CV.
• Citation: 426 F.3d 640
• Parties: NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, by its Trustees, John Bulgaro, Gary Staring, Brian R. Masterson, Daniel W. Schmidt, Michael S. Scalzo, Sr., Thomas K. Wotring, and J. Dawson Cunningham, Plaintiff-Counter-Defendant-Appellant, v. EXPRESS SERVICES, INC., and S & P Trucking, LLC, Defendants-Counter-Claimants-Appellees, Doren Avenue Associates, Inc., Defendant.
• Court: U.S. Court of Appeals — Second Circuit

426 F.3d 640

NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, by its Trustees, John Bulgaro, Gary Staring, Brian R. Masterson, Daniel W. Schmidt, Michael S. Scalzo, Sr., Thomas K. Wotring, and J. Dawson Cunningham, Plaintiff-Counter-Defendant-Appellant, v. EXPRESS SERVICES, INC., and S & P Trucking, LLC, Defendants-Counter-Claimants-Appellees Doren Avenue Associates, Inc., Defendant.

Docket No. 04-3237-CV.

United States Court of Appeals, Second Circuit.

Argued June 6, 2005.

Decided October 12, 2005.

COPYRIGHT MATERIAL OMITTED

Vincent M. DeBella, Paravati, Karl, Green & DeBella, Utica, NY, for Plaintiff-Appellant.

Ronald L. Kahn, Ulmer & Berne LLP, Cleveland, OH (Daniel J. Moore, Harris Beach LLP, Pittsford, NY, on the brief), for Defendants-Appellees.

Before: WALKER, Chief Judge, JACOBS and LEVAL, Circuit Judges.

JOHN M. WALKER, JR., Chief Judge:

Plaintiff-appellant New York State Teamsters Conference Pension and Retirement Fund ("the Fund") appeals from a judgment of the United States District Court for the Northern District of New York (David N. Hurd, Judge), granting defendants-appellees' motion for summary judgment. N.Y. State Teamsters Conference Pension & Ret. Fund v. Doren Ave. Assocs., Inc. ("Teamsters"), 321 F.Supp.2d 435 (N.D.N.Y.2004). The Fund claims that the district court erred when it decided itself, rather than submitting to the arbitrator, the issue of whether defendants were "employers" within the meaning of the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. § 1381 et seq. The Fund argues in the alternative that even if the issue was properly before the district court, the court erred in concluding that defendants were not "employers" under the MPPAA.

BACKGROUND

The Fund is a multiemployer benefit plan governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., as amended by the MPPAA. Howard's Express, Inc. ("Howard's"), which is not a party to this litigation, was an employer participating in the Fund. That participation ended when Howard's entered bankruptcy in March 2003. As a result of the bankruptcy, Howard's was deemed to have completely withdrawn from the plan, pursuant to 29 U.S.C. § 1383, and to be subject, pursuant to 29 U.S.C. § 1381, to withdrawal liability in roughly "the amount determined . . . to be the allocable amount of unfunded vested benefits." 29 U.S.C. § 1381(b)(1); see also Park South Hotel Corp. v. N.Y. Hotel Trades Council and Hotel Ass'n of N.Y. City, 851 F.2d 578, 580 (2d Cir.1988) (defining unfunded vested benefits).

In determining Howard's withdrawal liability, which totaled approximately $12 million, but which Howard's was presumably unable to pay, the Fund decided to pursue defendants-appellees Express Services, LLC ("Express") and S & P Trucking, LLP ("S & P"), as well as defendant Doren Avenue Associates, Inc. ("Doren"), on the theory that they were jointly liable for Howard's withdrawal liability. The Fund came to this conclusion because the owners and managers of these three entities were the same as, immediately related to, or close associates of the owners and managers of Howard's. Specifically, Philip Boncaro, Sr. ("Philip Sr.") and Samuel Boncaro, Jr. ("Samuel Sr.") held all of the voting shares in Howard's and most of the nonvoting shares; their sons, Philip Boncaro, Jr. ("Philip Jr.") and Samuel Boncaro, III ("Samuel Jr.") owned 3.4% of the nonvoting shares. Teamsters, 321 F.Supp.2d at 438. Express was owned by all four of the Boncaros, as well as Edward Haddad. Id. at 438-39. S & P was owned by Philip Jr. and Samuel Jr.¹ Id. at 439. Howard's, Express, and S & P were, during the relevant period, engaged in related lines of business within the freight transportation industry.²

The Fund sent each appellee a letter ("the liability notice") on June 9, 2003, formally notifying them of their liability, as required by 29 U.S.C. §§ 1382(2) and 1391(b)(1)(A), and demanding payment commencing August 9, 2003. The letter stated that Express and S & P were "responsible for [Howard's] withdrawal liability" because they were "affiliated with" Howard's. When Express and S & P failed to respond or to make payment, the Fund sent them a second letter ("the default notice"), stating that they were subject to default judgment if they did not cure their failure to pay within sixty days.³

Soon after, appellees submitted a timely request for review under 29 U.S.C. § 1399(b)(2), setting forth legal and factual arguments as to why they were not responsible for Howard's withdrawal liability. The Fund did not immediately respond. Instead, believing that appellees were required to make interim liability payments under the MPPAA's "pay-first-question-later" regime, the Fund filed a collection action in federal court in November 2003. See 29 U.S.C. §§ 1399(c)(2) (requiring employers who receive a liability notice to make interim payments, even if they dispute liability pending review or arbitration); see also id. § 1401(d) (providing for interim payments notwithstanding arbitration); Bowers v. Transportacion Maritima, Mexicana, S.A., 901 F.2d 258, 263 (2d Cir.1990) (describing the pay-first-question-later regime).

In its complaint, the Fund claimed that appellees were "under common control" with Howard's, and thus could be held responsible for its withdrawal liability, under 29 U.S.C. § 1301(b). Alternatively, the Fund alleged that appellees were liable as alter egos of Howard's, a claim that the Fund subsequently bolstered by asserting that appellees had engaged in transactions to "evade or avoid withdrawal liability," as defined by 29 U.S.C. § 1392(c).

Over the next few months, the parties filed a number of motions and cross-motions, as set forth in the district court's opinion. See Teamsters, 321 F.Supp.2d at 443-44. In January 2004, Express and S & P filed a timely demand for arbitration. See 29 U.S.C. § 1401. Throughout the district-court proceedings, the Fund maintained that whether or not appellees were employers within the meaning of the MPPAA was a matter for the arbitrator, not the court. See id. at 441, 444. Pending arbitration, the Fund argued, appellees were required to make interim payments under the MPPAA's pay-first-question-later regime. Id. at 440-41. In response to appellees' motion for a preliminary injunction to halt the collection action, the Fund cross-moved for summary judgment, seeking an order directing appellees to make the demanded interim payments pending arbitration. Id. at 437. The Fund's summary judgment motion was made without the benefit of discovery on the merits. Id. at 446. Express and S & P, after some procedural missteps, see id. at 443-44, eventually took the position that employer status was a matter for the court, notwithstanding MPPAA's arbitration provisions, id. at 441, and cross-moved for summary judgment on the employer-status issue, id. at 444.

The district court agreed with Express and S & P. It concluded first that employer status was a matter for the court, relying primarily on this court's decision in Bowers. Id. at 441-42. It then proceeded to the merits and found that the Fund had failed to raise a triable issue of material fact with respect to either its common-control or its alter-ego claims. Id. at 444-51. It therefore granted appellees' cross-motion for summary judgment and terminated the pending arbitration proceedings. Id. at 451.

This appeal followed.

DISCUSSION

The Fund argues (1) that the district court erred in deciding the employer-status question rather than submitting it to the arbitrator, and (2) that even if the district court correctly assumed jurisdiction over the employer-status question, it erred on the merits. We review the district court's grant of summary judgment de novo, construing evidence in the light most favorable to the non-moving party. E.g., Tenenbaum v. Williams, 193 F.3d 581, 593 (2d Cir.1999). Summary judgment is appropriate where "there is no genuine issue as to any material fact," Fed.R.Civ.P. 56(c), and where, accordingly, "the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

I. Employer-Status Determination

The primary issue before us is whether the district court erred in deciding itself, rather than submitting to arbitration, the issue of appellees' employer status under the MPPAA. The MPPAA provides that "[a]ny dispute between an employer and the plan sponsor of a multiemployer plan concerning a determination made under sections 1381 through 1399 of this title shall be resolved through arbitration." 29 U.S.C. § 1401(a). It also requires employers to make interim payments pending arbitration of disputes arising under the enumerated sections. Id. §§ 1399(c)(2), 1401(d). Relying on these provisions, the Fund contends (1) that all disputes over withdrawal liability — even disputes over whether a defendant is an "employer" subject to withdrawal liability — must be arbitrated; and (2) that pending arbitration of the employer-status question, the defendant must pay. Appellees, quoting the district court, assert that subjecting employer-status determinations to arbitration and requiring defendant employers to make interim payments would allow "a maliciously motivated Fund [to] systematically bankrupt entire groups of companies, on no other basis than, for example, a history of not hiring union workers." Teamsters, 321 F.Supp.2d at 443.

Fortunately, the answer to this dispute is clear. In Bowers v. Transportacion Maritima Mexicana, S.A., we held that "[t]he issue whether [an entity] was an `employer' within the meaning of the MPPAA is properly for the courts, not an arbitrator, to determine." 901 F.2d at 261. In Bowers, the defendant had claimed that it was not an "employer," and thus was not subject to withdrawal liability, because it was not...