Board of Trustees v. Elite Erectors, Inc.
| Decision Date | 09 February 1999 |
| Docket Number | No. IP-98-298-CH/G.,IP-98-298-CH/G. |
| Citation | 46 F.Supp.2d 852 |
| Parties | BOARD OF TRUSTEES, SHEET METAL WORKERS' NATIONAL PENSION FUND; Board of Trustees, National Training Fund For the Sheet Metal and Air Conditioning Industry; Board of Trustees, National Energy Management Institute Committee; Board of Trustees, Sheet Metal Occupational Health Institute Trust Fund; and Board of Trustees, Sheet Metal Workers' International Association Scholarship Fund, Plaintiffs, v. ELITE ERECTORS, INC., Skylight Consultants of America, Inc., and Mary Lowry, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
Brian D. Black, Office of General Counsel Sheet Metal Workers' National Pension, Alexandria, VA.
Christopher A. Poling, Kunz & Opperman, Indianapolis, IN.
Bret S. Clement, Buschmann Carr & Shanks, Indianapolis, IN.
ENTRY ON DEFENDANTS' MOTION TO SET ASIDE JUDGMENT
This case presents a practical problem in collecting debts under the Employee Retirement Income Security Act of 1974 (ERISA). When an employer owes money to a multi-employer benefit plan but is essentially judgment-proof, the trustees of the plan may try to collect the debt from the employer's officers or affiliated companies by piercing the corporate veil. The problem presented here is whether and how the trustees in such a case may take advantage of ERISA's provision for nationwide service of process, 29 U.S.C. § 1132(e)(2), to force the additional defendants to defend themselves in a distant forum.
Plaintiffs in this case are the trustees of a national pension fund and several related employee benefit funds for the benefit of sheet metal workers. Defendant Elite Erectors, Inc. was an employer that was delinquent in making contributions to those plans. Elite Erectors was owned and managed by one Frank Lowry. Defendant Skylight Consultants of America, Inc. is another corporation owned and operated by Frank Lowry. Defendant Mary Lowry is Frank Lowry's wife and was an officer of the delinquent employer. Plaintiffs obtained a default judgment against all three defendants in the United States District Court for the Eastern District of Virginia, where plaintiffs are based. The delinquent employer Elite Erectors has no assets. Plaintiffs now seek to enforce the judgment in Indiana against Skylight Consultants and Mary Lowry. Both have assets in Indiana.
Pursuant to Fed.R.Civ.P. 60(b)(4), these two defendants have moved to set aside the judgment against them on the ground that the Eastern District of Virginia lacked personal jurisdiction over them. Plaintiffs contend that these defendants were subject to jurisdiction in the Eastern District of Virginia because they were alter egos of the delinquent employer. As explained below, the court concludes that these defendants are entitled to litigate the alter ego issue in this court because the issue was essential to the exercise of jurisdiction over them in the Eastern District of Virginia. The court also concludes that these defendants were not alter egos of Elite Erectors, Inc. and that there was no other basis for the Eastern District of Virginia to exercise jurisdiction over these defendants. The court therefore grants the motion to set aside the judgment against defendants Skylight Consultants of America, Inc. and Mary Lowry, and denies plaintiffs' request to enforce the judgment to the extent they seek enforcement against those two defendants.
On June 26, 1996, plaintiffs filed their original complaint in the Eastern District of Virginia against only one defendant, Elite Erectors, Inc. Plaintiffs sought a money judgment under ERISA, 29 U.S.C. §§ 1132 & 1145, for delinquent contributions to retirement and employee benefit plans. Elite Erectors failed to respond. The clerk of the Eastern District of Virginia entered default against Elite Erectors on December 3, 1996.
On April 8, 1997, however, before judgment was entered, plaintiffs filed an amended complaint that added Skylight Consultants of America, Inc. and Mary Lowry as defendants. The amended complaint sought a money judgment for delinquent contributions, plus interest, liquidated damages, costs, and attorneys' fees. Plaintiffs relied on ERISA's provision for nationwide service of process. See 29 U.S.C. § 1132(e)(2). None of the three defendants appeared or responded. On November 17, 1997, the Eastern District of Virginia entered a default judgment against all three defendants in the amount of $21,695.25. Based on plaintiffs' unopposed evidence, the Eastern District of Virginia entered findings that Skylight Consultants and Mary Lowry were both alter egos of Elite Erectors and were jointly and severally liable to the plaintiffs for Elite Erectors' obligations.
On February 20, 1998, plaintiffs registered the judgment in this court pursuant to 28 U.S.C. § 1963 as a means of executing on the judgment. Elite Erectors has not responded in this court. Defendants Skylight Consultants and Mary Lowry have opposed plaintiffs' efforts to execute on the judgment. Invoking Fed.R.Civ.P. 60(b)(4), Skylight Consultants and Lowry have moved to set aside the judgment against them as void for lack of personal jurisdiction. Skylight Consultants is an Indiana corporation and Lowry is an Indiana resident. Skylight Consultants has not done business in Virginia. Lowry has not done business in Virginia; she has visited the state only on a personal vacation.
This court has frozen bank accounts belonging to Skylight Consultants and Lowry pending resolution of this dispute. On August 31, 1998, the court held an evidentiary hearing and heard oral argument on the pending matters that are now ready for decision.
There is no doubt that Elite Erectors was an employer for purposes of ERISA, nor is there any doubt about personal jurisdiction over Elite Erectors in the Eastern District of Virginia. Those conclusions do not give plaintiffs any practical help, however, because Elite Erectors ceased operations in February 1996. It is apparently defunct and has no available assets. A claim against Frank Lowry also appears to be pointless.
The issue here is whether the Eastern District of Virginia had personal jurisdiction over Skylight Consultants and Mary Lowry, so that the default judgment against them may be enforced in this district. Plaintiffs do not argue that Skylight Consultants or Mary Lowry had contacts with the state of Virginia sufficient to subject them to the jurisdiction of Virginia's state courts consistent with the Due Process Clause of the Fourteenth Amendment. Instead, plaintiffs contend that the Eastern District of Virginia had jurisdiction over Skylight Consultants and Mary Lowry under the nationwide service of process provision in ERISA, 29 U.S.C. § 1132(e)(2).
The parties have framed the issue in almost metaphysical terms concerning whether an effort to pierce a corporate veil to enforce an obligation under ERISA arises under federal law or state law. The answer to that question affects whether the Due Process Clauses of the Fourteenth and Fifth Amendments require that personal jurisdiction be supported by contacts with the forum state, Virginia, or the forum nation, the United States.
This court does not need to decide whether a claim to pierce the corporate veil arises under federal or state law. As explained below, if Skylight Consultants and/or Mary Lowry were alter egos of Elite Erectors, then the Eastern District of Virginia had personal jurisdiction over them. If they were not alter egos of Elite Erectors, then the Eastern District of Virginia did not have personal jurisdiction over them and the judgment cannot be enforced against them.
The procedures plaintiffs used in this case must be understood against the backdrop of Peacock v. Thomas, 516 U.S. 349, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996). In Peacock, the Supreme Court held that a district court, after having entered judgment against only an employer under ERISA, could not exercise subject matter jurisdiction under ERISA or ancillary jurisdiction in a later action seeking to hold an officer and shareholder of the defendant liable for the original judgment on a claim for "Piercing the Corporate Veil Under ERISA and Applicable Federal Law."
The plaintiff in Peacock was a former employee and beneficiary of a retirement plan operated by a company called Tru-Tech, Inc. The plaintiff had sued Tru-Tech and Peacock, who was an officer and shareholder of Tru-Tech. The district court held that Tru-Tech had breached its fiduciary duties under the plan but that Peacock was not a fiduciary, so the court entered judgment against only Tru-Tech.
After the judgment was affirmed on appeal, the plaintiff in Peacock was unable to collect the judgment from the company. The plaintiff then sued Peacock in district court in a new action alleging that Peacock had entered into a civil conspiracy to strip the company of assets to prevent satisfaction of the judgment and had fraudulently conveyed the company's property to others, including himself. The plaintiff later added a claim described as "Piercing the Corporate Veil Under ERISA and Applicable Federal Law." The district and circuit courts held in the plaintiff's favor against Peacock.
The Supreme Court reversed and held that the district court lacked subject matter jurisdiction over the second action against Peacock. 516 U.S. at 352, 116 S.Ct. 862. First, the Court concluded that the plaintiff's claim for piercing the corporate veil did not arise under ERISA: "We are not aware of, and [plaintiff] Thomas does not point to, any provision of ERISA that provides for imposing liability for an extant ERISA judgment against a third party." Id. at 353, 116 S.Ct. 862. The court continued:
Moreover, Thomas' veil-piercing claim does not state a cause of action under ERISA and cannot independently support federal jurisdiction. Even if ERISA permits a plaintiff to pierce the corporate...
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Board of Trustees v. Elite Erectors, Inc.
...over Skylight Consultants and Lowry so that its judgment against them was void. See Board of Trustees, Sheet Metal Workers' National Pension Fund v. Elite Erectors, Inc., 46 F.Supp.2d 852 (S.D.Ind.1999). This court concluded in essence that, notwithstanding the default judgment, Skylight Co......
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Sheet Metal Workers v. Elite Erectors
...the district judge in Indiana concluded that they were not Elite's alter egos and therefore had not been subject to suit in Virginia. 46 F. Supp. 2d 852, reconsideration denied, 64 F. Supp. 2d 839 (1999). Because the Virginia court lacked personal jurisdiction over Skylight and Lowry, the I......