Ala. Dep't of Indus. Relations v. Ahi Linden Lumber Llc.

• Decision Date: 11 February 2011
• Docket Number: 2090891.
• Citation: 68 So.3d 187
• Parties: ALABAMA DEPARTMENT OF INDUSTRIAL RELATIONSv.AHI LINDEN LUMBER, LLC.
• Court: Alabama Court of Civil Appeals

68 So.3d 187

ALABAMA DEPARTMENT OF INDUSTRIAL RELATIONS

v.AHI LINDEN LUMBER, LLC.

2090891.

Court of Civil Appeals of Alabama.

Feb. 11, 2011.

Frank G. Marsh, special asst. atty. gen., and Glenn Chaffin, deputy atty. gen., Alabama Department of Industrial Relations, Legal Division, for appellant.Woodford W. Dinning, Jr., Demopolis, for appellee.MOORE, Judge.

The Alabama Department of Industrial Relations (“ADIR”) appeals from a judgment entered by the Marengo Circuit Court (“the trial court”) in favor of AHI Linden Lumber, LLC (“AHI”), on February 24, 2009. Because the trial court's judgment recalculated AHI's unemployment-compensation contribution rate and the benefit ratio used to determine the contribution rate for the year 2009 based solely on the trial court's determination that AHI was not a successor in interest to Linden Lumber Company, Ltd. (“Linden Lumber”)—a determination the trial court did not have the authority to make—we reverse the trial court's judgment and remand the cause with instructions.

Facts

According to Hugh Overmeyer, Linden Lumber began operation in the 1950s and was owned by his grandfather. Eventually, Hugh and his father, Don Overmeyer, gained ownership of Linden Lumber, which began to encounter economic difficulties in 2006 and 2007. At one time, Linden Lumber employed 700 to 800 people, but, by late 2007, the workforce had been reduced to between 200 and 400 employees. Hugh testified that Linden Lumber owned approximately 800 acres of land in Linden, which included a sawmill and flooring plants, as well as a flooring plant that sat on 60 acres of land in Thomasville, a wood yard that sat on 20 acres of land in Mississippi, and timberland in various Alabama counties. The primary lender on loans secured by Linden Lumber's property was Federal Land Bank; Wachovia Bank was the secondary lender. Hugh testified that, at a meeting in 2007 with employees from Federal Land Bank and Wachovia Bank, certified appraisals revealed that the value of Linden Lumber exceeded $30 million. Federal Land Bank commenced foreclosure proceedings on Linden Lumber's property in 2007. According to Hugh, in order to avoid closure, Linden Lumber sought a purchaser for the sawmill and the flooring plants located in Linden. Hugh testified that HIG Capital and Ted Rossy formed AHI and acquired some of the assets of Linden Lumber, including the sawmill in Linden; that sale took place on March 31, 2008, and, according to Hugh, AHI paid approximately $10 million for the assets it purchased from Linden Lumber. Hugh stated that he and his father had had equity in Linden Lumber at the time of the sale and that they lost that equity upon the sale to AHI.

Hugh testified that AHI acquired approximately 153 acres of land owned by Linden Lumber, including the sawmill, located in Linden. AHI did not acquire the other approximately 650 acres of land in Linden, the 20 acres located in Mississippi, the 60 acres located in Thomasville, or any of the timberland located in various Alabama counties. Hugh stated that neither he nor his father held an ownership interest in AHI but that Hugh continued as an employee of AHI and acted as the vice president of AHI. Hugh described the sale of Linden Lumber's assets to AHI as an asset purchase and stated that AHI was not a successor company to Linden Lumber. According to Hugh, AHI was formed and it had secured a separate independent employer's identification number from the Internal Revenue Service before the sale on March 31, 2008. Hugh testified that AHI retained over 90% of the employees from Linden Lumber and that AHI continued the business of Linden Lumber without stopping operations. He testified, however, that Linden Lumber had discharged each of its employees and that AHI had hired some of those employees, some with different terms of employment including lower rates of pay, along with some additional employees. Hugh stated that AHI had shut down parts of the sawmill upon the sale because of the economy but that AHI had never shut down operations entirely.

Terry Dunham, the office and credit manager at AHI, stated that he had worked for Linden Lumber for 31 years. Dunham testified that Hugh and his father had no ownership interest in AHI, that they did not receive any equity at the time of the sale, and that they had lost their investments in Linden Lumber. Dunham stated that the value of the assets of Linden Lumber that were not acquired by AHI at the time of the sale was probably “somewhere around $20 million.” Dunham testified that he had written a letter to ADIR dated May 2, 2008, in which he requested an employer account number for AHI, and that he had enclosed an application, which had been signed by Hugh on behalf of AHI, to determine AHI's liability for payment of unemployment-compensation benefits. In that letter, Dunham stated that “[AHI] purchased all of the assets of [Linden Lumber].” Dunham testified that, at the time he wrote that letter, the other assets of Linden Lumber had “gone away” or been bought by other entities and that what had been sold to AHI was all that was left of Linden Lumber at the time of the sale.

In a document responding to Dunham's letter, entitled “Official Notification of Registration” (“the notification letter”), dated May 13, 2008, ADIR informed AHI that it had determined AHI to be a “successor-in-interest” to Linden Lumber; it also assigned AHI an employer account number and informed AHI of its unemployment-compensation contribution rate. The notification letter stated, in pertinent part:

“The determination for your liability and tax rate is based on the information furnished [to ADIR]. If it is later determined, however, that the information was incorrect, whether or not it was known to be incorrect when furnished, the determination of liability and/or tax rate may be adjusted using the correct information if received within the protest period. If you disagree with this determination, a written protest must be filed within thirty (30) days from the date of this letter.”

(Bold typeface in original.)

Hugh explained his understanding that, in determining a company's contribution rate, ADIR would assign an “experience rating” based on the company's employment and unemployment history for the preceding three years. He testified that his understanding is that, in assigning a company an experience rating, ADIR looks at the company's history of layoffs and the number of employees that have drawn unemployment. According to Hugh, because Linden Lumber had been in a downward spiral before the sale, there were a lot of layoffs that had driven Linden Lumber's unemployment contributions up during its last three years of operation and, as a result, had required Linden Lumber to pay more than its usual amount in unemployment contributions. Hugh testified that a protest of the determinations in ADIR's May 13, 2008, notification letter had not been filed by AHI within the appeal time stated in the letter but that a protest was filed later. He testified that ADIR remitted a document to AHI entitled “Experience Rating Charges,” which was mailed on August 6, 2008, that listed the unemployment-compensation benefits that had been paid to AHI's workers in the calendar quarter ending June 30, 2008. That document states, in pertinent part, that “[c]harges become final unless request for review is submitted within 30 days from the mailing date.” Jo Doyle, the sections supervisor for experience rating in the status unit of ADIR, testified that AHI failed to file an appeal from the experience-rating charges within 30 days of the mailing date of the document.

Hugh stated that, although AHI was late to appeal the contribution rate that was set by AHI, it did appeal the contribution rate for the 2009 year. In a letter dated April 20, 2009, ADIR informed AHI that an administrative review of AHI's unemployment-compensation contribution rate for the calendar year 2009 had been conducted and that it had determined that the rate was correct. That letter stated, in pertinent part:

“As the initial establishment of your account and the unemployment tax rate for the calendar year 2008 were not timely protested, the appeal process has ended. However, if your company continues to disagree with the unemployment tax rate for calendar year 2009, further appeal should be made to the circuit court in the county where the business is located or Montgomery County. The request must be submitted within thirty (30) days from the date of this letter as provided for in Section 25–5–54(h) and implemented by Section 25–4–134 of the Code of Alabama 1975 amended.”

Hugh testified that, as far as the determination that AHI was a successor in interest to Linden Lumber, nothing had changed between May 13, 2008, when the notification letter was sent, and April 20, 2009, when the letter denying AHI's appeal was sent.

Doyle testified that she establishes or oversees the establishment of employer accounts and the experience ratings of employers. Doyle stated that an employer's experience rating is based on three years of physical experience of an employer. She stated that “[a]n employer who acquires the ongoing business, trade, or substantially all the assets of another company establishes their rate based on the experience of another company, or, if you start out at a brand new rate, then you start out with an average rate which does not require any kind of calculation but is a much lower rate.” She stated that the contribution rate for a new employer with no experience rating is 2.70% of wages paid and that, at the time of AHI's acquisition of Linden Lumber, based on Linden Lumber's experience rating, Linden Lumber's contribution rate was 6.24% of its “taxable wages and benefit charges.” Doyle testified that ADIR had received a letter from AHI in May 2008, along with the letter from Dunham, informing ADIR that AHI had purchased all the assets of Linden Lumber. She stated that...