Advanced Contracting Solutions, LLC v. Lathers (In re Advanced Contracting Solutions, LLC)

• Decision Date: 31 January 2018
• Docket Number: Case No. 17–13147 (SHL),Adv. Proc. 18–01003 (SHL)
• Citation: 582 B.R. 285
• Parties: IN RE: ADVANCED CONTRACTING SOLUTIONS, LLC, Debtor. Advanced Contracting Solutions, LLC, Plaintiff, v. Metallic Lathers and Reinforcing Ironworkers Local 46, as Sponsors of Various Fringe Benefit Funds, Building Material Teamsters Local 282, as Sponsors of Various Fringe Benefit Funds, Angelo Angelone, Eric Lee and Michael Salgo as Trustee of the Cement & Concrete Workers Pension Trust Fund, Cement & Concrete Workers Welfare Trust Fund, Cement & Concrete Workers Annuity Trust Fund, Cement & Concrete Workers Scholarship Trust Fund, Kieran O'Sullivan as Trustee of the Cement & Concrete Workers Training and Education Trust Fund and Building Material Teamsters Local 282, IBT, Thomas Gesualdi, Louis Bisignano, Anthony D'Aquila (Replaced by Trustee Darin Jeffers as of January 1, 2017), Michael O'Toole, Michael Bourgal, Frank H. Finkel, Joseph A. Ferrara, Sr., Marc Herbst, Denise Richardson, and Thomas Corbett as Trustees and Fiduciaries of the Local 282 Welfare Trust Fund, the Local 282 Pension Trust Fund, the Local 282 Annuity Trust Fund, the Local 282 Job Training Trust Fund, and the Local 282 Vacation and Sick Leave Trust Fund, and John Does 1 Through 10, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

582 B.R. 285

IN RE: ADVANCED CONTRACTING SOLUTIONS, LLC, Debtor.

Advanced Contracting Solutions, LLC, Plaintiff,

v.Metallic Lathers and Reinforcing Ironworkers Local 46, as Sponsors of Various Fringe Benefit Funds, Building Material Teamsters Local 282, as Sponsors of Various Fringe Benefit Funds, Angelo Angelone, Eric Lee and Michael Salgo as Trustee of the Cement & Concrete Workers Pension Trust Fund, Cement & Concrete Workers Welfare Trust Fund, Cement & Concrete Workers Annuity Trust Fund, Cement & Concrete Workers Scholarship Trust Fund, Kieran O'Sullivan as Trustee of the Cement & Concrete Workers Training and Education Trust Fund and Building Material Teamsters Local 282, IBT, Thomas Gesualdi, Louis Bisignano, Anthony D'Aquila (Replaced by Trustee Darin Jeffers as of January 1, 2017), Michael O'Toole, Michael Bourgal, Frank H. Finkel, Joseph A. Ferrara, Sr., Marc Herbst, Denise Richardson, and Thomas Corbett as Trustees and Fiduciaries of the Local 282 Welfare Trust Fund, the Local 282 Pension Trust Fund, the Local 282 Annuity Trust Fund, the Local 282 Job Training Trust Fund, and the Local 282 Vacation and Sick Leave Trust Fund, and John Does 1 Through 10, Defendants.

Case No. 17–13147 (SHL)

Adv. Proc. 18–01003 (SHL)

United States Bankruptcy Court, S.D. New York.

Signed January 31, 2018

KLESTADT WINTERS JURELLER SOUTHARD & STEVENS, LLP, Counsel for Debtor and Debtor-in-Possession, By: Tracy L. Klestadt, Esq., Fred Stevens, Esq., Brendan M. Scott, Esq., Lauren C. Kiss, Esq., 200 West 41^st Street, 17^th Floor, New York, New York 10036

LOWENSTEIN SANDLER LLP, Counsel for the Official Committee of Unsecured Creditors, By: Jeffrey Cohen, Esq., Eric S. Chafetz, Esq., 1251 Avenue of the Americas, New York, New York 10020,—and—Kenneth A. Rosen, Esq., Michael Papandrea, Esq., One Lowenstein Drive, Roseland, New Jersey 07068

COHEN, WEISS & SIMON, LLP, Counsel for Trustees of Cement Workers Funds, By: Thomas M. Kennedy, Esq., Richard Sletzer, Esq., Susan M. Jennik, Esq., 900 Third Avenue, New York, New York 10022

TRIVELLA & FORTE, LLP, Counsel for the Creditors Trustees and Fiduciaries of the Local 282, Welfare Trust Fund, the Local 282 Pension Trust Fund, the Local 282, Annuity Trust Fund, the Local 282, Job Training Trust Fund, and the Local 282 Vacation and Sick Leave Trust Fund, By: Christopher Smith, Esq., 1311 Mamaroneck Avenue, Suite 170, White Plains, New York 10605

BRADY MCGUIRE & STEINBERG, P.C., Counsel for International Union of Operating Engineers Local 14–14B, AFL–CIO and International Union of Operating Engineers Local 15, 15A & 15D, AFL–CIO, By: James M. Steinberg, Esq., 303 South Broadway, Suite 234, Tarrytown, New York 10591

GARVEY, CUSHNER & ASSOCIATES, PLLC, Counsel for International Union of Operating Engineers Local 14–14B, AFL–CIO and International Union of Operating Engineers Local 15, 15A & 15D, AFL–CIO, By: James J. Rufo, Esq., 500 Main Street, Suite 390, White Plains, New York 10606

WESTERMAN BALL EDERER MILLER ZUCKER & SHARFSTEIN, LLP, Counsel for Signature Bank, By: John E. Westerman, Esq., Mickee Hennessy, Esq., 1201 RXR Plaza, Uniondale, New York 11556

BERGER SINGERMAN, Counsel for Trident General Contracting LLC, By: Isaac M. Marcushamer, Esq., 1450 Brickell Avenue, Suite 1900, Miami, Florida 33131

SPIVAK LIPTON LLP, Counsel for the New York City & Vicinity District Council of Carpenters, By: James M. Murphy, Esq., Gillian Costello, Esq., 1700 Broadway, Floor 21, New York, New York 10019

CULLEN AND DYKMAN LLP, Counsel for Navillus Tile, Inc., By: C. Nathan Dee, Esq., Elizabeth M. Aboulafia, Esq., Jean Pierre van Lent, Esq., Elizabeth Usinger, Esq. 100 Quentin Roosevelt Boulevard, Garden City, New York 11530

CHIESA SHAHINIAN & GIANTOMASI PC, Counsel for Liberty Mutual Insurance Company, By: Adam P. Friedman, Esq., Scott A. Zuber, Esq., 11 Times Square, 31st Floor, New York, New York 10036

MODIFIED BENCH RULING

SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the motion (the "Sale Motion") [ECF No. 122]¹ of Debtor Advanced Contracting Solutions LLC ("ACS")—and its supplemental statement in further support [ECF No. 156]—to sell substantially all of its assets free and clear and subject to higher and better offers.² Through the motion, Debtor seeks authority to sell its concrete construction business. Through its motion and a complaint filed in an adversary proceeding, Debtor ACS also seeks a determination that: (1) it is not a party to any collective bargaining agreement(s) (or CBAs) and that it therefore has no CBAs to modify or reject under 11 U.S.C. § 1113 ; or (2), in the alternative, that the proposed sale does not implicate or offend Section 1113. See ECF Nos. 157, 202; ECF No. 165 (Debtor's complaint seeking injunctive relief in Adversary Proceeding 18–01003).

The backdrop for all of Debtor's requested relief is a decision issued by the United States District Court for the Southern District of New York on September 20, 2017 in a case called Moore v. Navillus Tile, Inc. , 276 F.Supp.3d 110, 2017 WL 6388962 (S.D.N.Y. 2017) (the "District Court Decision" or the "Decision"). In that Decision, the District Court issued a ruling finding that non-union ACS is the alter ego of a construction company called Navillus Tile, Inc. ("Navillus"), and thus liable for non-compliance with the CBAs of Navillus. Moore v. Navillus, at 142-42, 150-51, 154-56, 166-67, 2017 WL 6388962, at *27, *34, *38, *45. As part of that ruling, the District Court held ACS and Navillus to be jointly and severally liable for a judgment of $73.4M for failure to make required contributions for ACS projects to certain union-maintained benefits funds (the "Union Funds") under the applicable Navillus CBAs. Id. at 166-67, 2017 WL 6388962, at *45.

As judgment creditors in the Debtor's bankruptcy case, several of those same Union Funds, together with the Unsecured Creditors Committee (the "UCC" and collectively the "Objectors"), have objected to the relief sought by the Debtor today. See, e.g. , Cement Workers Objections, ECF Nos. 125, 137; 207; Local 282 Trust Funds Objections, ECF No. 138, 187; UCC Objections, ECF Nos. 136, 183. For ease of reference, the Court will refer to the two main objecting Unions using the shorthand of the Cement Workers and Local 282, although there are other objecting Unions as well. As a practical matter, counsel for the Cement Workers, Cohen, Weiss & Simon LLP, took the laboring oar at trial for the Objectors—both in presenting the evidence and arguing the case together with counsel for the UCC. The Objectors argue that the District Court Decision represented a finding of alter ego status that remains applicable on a forward-looking basis and that ACS has failed to make a "bright line" demonstration that things are different now so as to disentangle ACS from Navillus, meaning that ACS is still bound under the Navillus CBAs. The Objectors further contend that the Debtor's assets cannot be sold free of those CBA obligations because ACS does not satisfy the requirements of Section 1113. Finally, the Objectors contend that the Debtor and proposed purchaser do not satisfy the bankruptcy requirements for a free and clear sale, including those for a good faith purchaser finding under Bankruptcy Code Section 363(m).

ACS disagrees on all counts. As a threshold matter, ACS argues that it has no ongoing obligation under the CBAs because the District Court dismissed with prejudice a claim by certain plaintiffs in that case that expressly sought a judgment requiring ACS to remain current under the CBAs going forward, and that such dismissal constitutes a res judicata bar to the Unions' current claim for ongoing liability under the CBAs. But ACS spends far more of its time on its second argument—namely its contention that to the extent it ever was an alter ego of Navillus, that it has now disentangled itself from Navillus. Thus with its status as an alter ego having ended, ACS is no longer bound to the Navillus CBAs, which therefore do not serve as an impediment to the proposed sale. Even if it still is bound by the CBAs, however, ACS contends that it has satisfied the requirements under Section 1113 for terminating those CBAs, notwithstanding the unique circumstances of this case. Finally, ACS contends that it has satisfied all the Bankruptcy Code requirements for a sale, including those for a good faith finding for the proposed purchaser under Section 363(m).

BACKGROUND

A. ACS History and Background

ACS was formed as a Delaware Limited Liability Company on July 16, 2013. Sale Motion ¶ 3; Moore v. Navillus, at 116-17, 2017 WL 6388962, at *2,. ACS was founded by Eoin Moriarty as an open-shop concrete foundation and concrete super-structure contractor. Sale Motion ¶ 5. ACS currently employs approximately 450 employees, and as many as 700 people during peak times. Sale Motion ¶ 8. ACS is currently engaged on fourteen construction jobs across New York City which it estimates have future revenues of approximately $75 million. Sale Motion ¶ 9. On average, ACS has annual revenues of in excess of $100 million, and has completed over $250 million in work within the five boroughs of New York City since inception. Sale Motion ¶¶ 2, 5. The Debtor was operating a profitable business up until the District Court Decision. Sale Motion at 2–3.

B. The District Court Decision

On September 22, 2017, the District Court entered a judgment against ACS, Navillus and other co-defendants, holding ACS and Navillus jointly and severally liable for satisfaction of an award of $73.4 million for a claim by various union benefit funds that ACS was an alter ego of Navillus, a union concrete contractor, and therefore liable to the Union Funds on account of ACS jobs staffed with non-union employees. See generally Moore v. Navillus . The District Court Decision did not provide for any injunctive relief requiring ACS to remain current on those union benefit funds obligations on a go-forward basis. Id. ACS is pursuing an appeal of that judgment...