Brown v. Astro Holdings, Inc

• Decision Date: 29 August 2005
• Docket Number: No. Civ.A. 04-5031.,Civ.A. 04-5031.
• Citation: 385 F.Supp.2d 519
• Parties: Timothy A. BROWN, et al., Plaintiffs v. ASTRO HOLDINGS, INC., et al., Defendants
• Court: U.S. District Court — Eastern District of Pennsylvania

385 F.Supp.2d 519

Timothy A. BROWN, et al., Plaintiffs v. ASTRO HOLDINGS, INC., et al., Defendants

No. Civ.A. 04-5031.

United States District Court, E.D. Pennsylvania.

August 29, 2005.

Bruce S. Levine, Peter D. Dechiara, Tzvia Feiertag, Cohen Weiss & Simon LLP, New York, NY, Linda M. Martin, Willig Williams & Davidson, Philadelphia, PA, for Plaintiffs.

Patrick M. Northen, Dilworth Paxson, LLP, Sarah Elise Pontoskise, Conrad O'Brien Gellman & Rohn, PC, Philadelphia, PA, for Defendants.

MEMORANDUM AND ORDER

McLAUGHLIN, District Judge.

In this suit, the trustees of a multi-employer pension plan seek to recover ERISA withdrawal liability from several corporate affiliates and individual owners of a bankrupt shipping company. The plaintiffs allege that the corporate affiliates are liable as "alter egos" of the original company and that the individual owners are liable under a piercing-the-corporate-veil theory.¹

The defendants have moved to dismiss on the ground that ERISA does not permit liability to be imposed under either an alter ego or a veil piercing theory. This appears to be an issue of first impression in this circuit. The Court finds that both the plaintiffs' alter ego and veil piercing claims are permissible under ERISA. The relevant statutory language is not so comprehensive as to preclude the availability of alter ego or veil piercing theories, and the application of those theories here accords with both federal common law and the purposes and policies behind ERISA.

In addition, there is also an issue as to subject matter jurisdiction over this action because the plaintiffs are not alleging a direct violation of ERISA but instead are seeking to impose ERISA liability solely under alter ego and veil piercing theories. The Court, however, concludes that it has jurisdiction over this matter because the plaintiffs' alter ego claim states a federal question under ERISA and the Court has supplemental jurisdiction over the plaintiffs' veil piercing claim.

I. FACTUAL BACKGROUND

The plaintiffs in this suit are the trustees of the Master, Mates and Pilots Pension Plan (the "Plan"), which is alleged to be a multiemployer pension plan within the meaning of 29 U.S.C. §§ 1002(37) and 1301(a)(3). Complaint ¶¶ 8-9. They seek to recover withdrawal liability under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act of 1980 (the "MPPAA"), 29 U.S.C. § 1381 et. seq.

The withdrawal liability at issue arises from the bankruptcy of a shipping company, NPR, Inc. ("NPR"). The plaintiffs' complaint alleges that on or about March 2001, NPR and several related companies, but not any of the defendants, declared bankruptcy, triggering a NPR's "complete withdrawal" from the Plan on or about April 2001. Complaint ¶¶ 11, 16, 17. This withdrawal triggered ERISA liability under 29 U.S.C. § 1381(a).

The plaintiffs have now sued to recover this liability from thirteen corporate affiliates of NPR (the "corporate defendants") and four individual members of the Holt family (the "individual defendants"). The four members of the Holt family are Thomas Holt, Sr. and his children Thomas Holt, Jr., Leo Holt and Michael Holt.

The plaintiffs allege that the corporate defendants, together with NPR and other companies not involved in this lawsuit, constituted a family of closely- held corporations, all owned by Thomas Holt, Sr. and his sons and all in the business of providing port services and shipping. Complaint ¶¶ 13, 22, 24. The plaintiffs describe the companies as a "family conglomerate" which they refer to as the "Holt Family Enterprise." Complaint ¶¶ 22-23.

The complaint contains few details of the alleged relationships between the corporate defendants and NPR or of the ownership of these companies by the individual defendants. The complaint alleges that Thomas Holt, Sr. indirectly owns 100% of NPR through two layers of wholly owned subsidiaries. NPR is alleged to be wholly owned by NPR Holding Corporation, which is wholly owned by the Holt Group, Inc., which is wholly owned by Thomas Holt, Sr. Complaint ¶ 26. Thomas Holt, Jr. is alleged to have been appointed President and Director of NPR in 1997 and Michael Holt and Leo Holt are alleged to have been Directors of the Holt Group, Inc. Complaint ¶ 27. The complaint does not explain the relationship between NPR and the corporate defendants or allege that any of the individual defendants other than Thomas Holt, Sr. had any ownership interest in NPR.

The complaint also contains few and contradictory allegations about the ownership of the corporate defendants. The complaint generally alleges on information and belief that the Holt children "directly or indirectly co-owned" the corporate defendants. Complaint ¶ 13. The complaint also contains the somewhat contradictory and much less sweeping allegation that "at all relevant times" each of the individual defendants owned "one or more" of the corporate defendants. Complaint ¶ 25. In addition, the complaint alleges that each of the individual defendants had the option of obtaining unspecified "interests" in the corporate defendants at any time and that they transferred some of these interests in the corporate defendants to third-party family members and friends. Complaint ¶ 29-30. The plaintiffs contend that the individual defendants "maintained absolute domination and control" over the corporate defendants and treated NPR and the corporate defendants as "one closely held enterprise." Complaint ¶ 31.

Based on these allegations, the plaintiffs advance claims based on alter ego liability and piercing the corporate veil. The plaintiffs contend that the corporate defendants are liable as "alter egos" of NPR because NPR and the affiliates are so "inextricably intertwined" that they have "effectively merged" into a single entity. Complaint at ¶¶ 28, 36, 48-49. They allege that the individual defendants are liable under a piercing theory because they "directly or indirectly" owned NPR and the corporate defendants and they "failed to maintain corporate formalities" between NPR and its corporate affiliates, and that therefore "the corporate veils of the Corporate Defendants should be pierced to hold the [individual defendants] personally, jointly, and severally liable for NPR's withdrawal liability under ERISA." Complaint at ¶¶ 38, 43, 50.

The plaintiffs' complaint does not allege that any of the defendants fit the statutory definition of an "employer" liable for withdrawal liability under 29 U.S.C. § 1381(a), either directly or as "trades or businesses under common control" to be treated as a single employer under 29 U.S.C. § 1301(b)(1). At oral argument, the plaintiffs confirmed that they are proceeding only on their alter ego and veil piercing theories. Transcript of June 9, 2005, Hearing at 3.

The defendants have now moved to dismiss the plaintiffs' complaint on the ground that neither of the plaintiffs' theories of liability is available under ERISA or the MPPAA. The gist of the defendants' argument is that ERISA is so comprehensive a statute that it permits only those remedies specifically authorized by its terms. Because ERISA contains no provisions specifically authorizing alter ego liability or veil piercing, the defendants contend that those theories of liability are not permitted.

Before considering the defendants' arguments, however, the Court must first determine whether it has subject matter jurisdiction over the plaintiffs' claims. In the context of a suit to enforce a judgment, the United States Supreme Court has held that claims seeking to pierce the corporate veil to impose ERISA liability do not present a federal question. Peacock v. Thomas, 516 U.S. 349, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996). The Court believes that it must therefore address whether, under Peacock, subject matter jurisdiction exists over a suit like this one where the only claims are brought under alter ego and veil piercing theories.

II. LEGAL ANALYSIS

A. Subject Matter Jurisdiction over the Plaintiffs' Claims

Although neither the plaintiffs nor the defendants have addressed the issue of subject matter jurisdiction, the Court has "an independent obligation to satisfy [itself] of jurisdiction if it is in doubt." Nesbit v. Gears Unlimited, Inc., 347 F.3d 72, 76-77 (3d Cir.2003). Here, there is a question whether the Court has jurisdiction over the plaintiffs' claims.

The plaintiffs' complaint contends that the Court has federal question jurisdiction over its alter ego and veil piercing claims under 28 U.S.C. § 1331.² The United States Supreme Court, however, has held that suits that seek to pierce a corporate veil and impose liability on defendants not otherwise liable under ERISA do not state a federal question. Peacock v. Thomas, 516 U.S. 349, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996).

Peacock was decided in a different context than this case. The plaintiff in Peacock had already obtained a judgment against the statutory employer liable under ERISA and was seeking to enforce that judgment in a second suit against a related company alleging only veil piercing. Id. at 351-52, 116 S.Ct. 862.

The Peacock holding, therefore, might be read as applying only to suits seeking to enforce a judgment under a veil piercing theory, not to suits like this one where there is no pre-existing judgment about the underlying ERISA liability at issue. Some language in the Court's opinion supports this: the Court describes the issue before it as "whether federal courts possess ancillary jurisdiction over new actions in which a federal judgment creditor seeks to impose liability for a money judgment on a person not otherwise liable for the judgment." Id. at 351, 116 S.Ct. 862. The Court also says that, even assuming arguendo that veil piercing is available under ERISA, a plaintiff can invoke the jurisdiction of the federal courts only "by independently alleging a violation of...