Carpenters Health and Welfare Fund of Philadelphia and Vicinity by Gray v. Kenneth R. Ambrose, Inc.
| Decision Date | 30 December 1983 |
| Docket Number | No. 82-1733,A,Nos. 82-1733,82-1734,No. 82-1734,82-1733,s. 82-1733 |
| Court | U.S. Court of Appeals — Third Circuit |
| Parties | 26 Wage & Hour Cas. (BN 1304, 99 Lab.Cas. P 10,745, 5 Employee Benefits Ca 1291 CARPENTERS HEALTH AND WELFARE FUND OF PHILADELPHIA AND VICINITY By Robert GRAY, Trustee Ad Litem & Carpenters Pension Fund of Philadelphia and Vicinity By Robert Gray, Trustee Ad Litem & Carpenters Joint Apprentice Committee By Robert Gray, Trustee Ad Litem & Industry Advancement Program By Joseph Washkill, Trustee Ad Litem & Metropolitan District Council of Philadelphia and Vicinity United Brotherhood of Carpenters and Joinders of America, Appellees inppellants inv. KENNETH R. AMBROSE, INC. & Kenneth R. Ambrose & Linda Ambrose, Appellants inppellees in |
Stephen D. Ivey (argued), Anthony B. Quinn, Philadelphia, Pa., for appellees/cross-appellants, Kenneth R. Ambrose, Inc., et al.
William J. Einhorn (argued), Thomas W. Jennings, Sagot & Jennings, Philadelphia, Pa., for appellants/cross-appellees, Carpenters Philadelphia and Vicinity, et al.
Before HUNTER and HIGGINBOTHAM, Circuit Judges, and ZIEGLER, District Judge. *
Kenneth and Linda Ambrose appeal from a judgment of the district court finding them personally liable along with Ambrose Inc. for delinquent fringe benefit contributions in a suit brought by the Carpenters Health and Welfare Fund of Philadelphia and Vicinity (the "Fund") 1 under Section 301 of the Labor Management Relations Act of 1947 ("LMRA"), 29 U.S.C. Sec. 185(a) (1976), and the Pennsylvania Wage Payment and Collection Law ("WPCL"), PA.STAT.ANN. tit. 43, Secs. 260.1-.11. (Purdon Supp.1983-1984). The district court also awarded attorneys' fees to the Fund's attorneys. Counsel for the Fund cross-appeal from the district court's attorneys' fee award which reduced the lodestar by 50% and assessed liability for the attorneys' fees only against Ambrose, Inc., a bankrupt corporation. 2
The Ambroses are the sole officers and majority shareholders of Ambrose, Inc., a construction firm. The corporation failed to make its required contributions to the various union pension funds as provided by their collective bargaining agreement. The delinquency in contributions resulted from financial difficulties caused in great part by Ambrose, Inc.'s failure to be paid for work it performed at the behest of the United Brotherhood of Carpenters and Joiners of America ("the Union").
The Fund filed a Section 301 LMRA 3 suit in federal court to recover the delinquent contributions. It also asserted a pendant state claim to collect liquidated damages equal to 25% of the amount owed as provided by the WPCL. 4
During the district court proceedings, Ambrose, Inc. did not contest its liability to the Fund for the delinquent fringe benefits. Indeed, prior to trial it agreed to an entry of judgment against it for $17,199.25, as part of the sum owed to the Fund for attorneys' fees and for costs. Ambrose, Inc. only disputed the claim against it for liquidated damages. Linda and Kenneth Ambrose, however, contested both their individual liability for the delinquent contributions and liquidated damages, they also objected to the imposition of any counsel fees against them in their individual capacity.
The district court ruled that the Ambroses were personally liable as employers under both the LMRA and the WPCL for delinquent contributions in the amount of $14,747.82. The district court also found both the Ambroses and Ambrose, Inc. liable under the WPCL for liquidated damages in the amount of 25% of the judgment or $8,173.14. It awarded attorneys' fees to plaintiffs' counsel, but after considering the fee application, the district court reduced the lodestar of $12,955.35 by 50% and imposed liability only against the corporation "because of overriding equitable considerations ...." Joint Appendix ("J.A.") at 53a.
The Ambroses appeal the District Court's finding that, in their individual capacities, they are liable as employers for the delinquent contributions. 5
The WPCL defines employer as:
every person, firm, partnership, association, corporation, receiver or other officer of a court of this Commonwealth and any agent or officer of any of the above-mentioned classes employing any person in this Commonwealth.
PA.STAT.ANN. tit. 43, Sec. 260.2a (Purdon Supp.1983-1984). The district court concluded that as the "agents and officers" of Ambrose, Inc. the Ambroses fit within the meaning of the term employer as used in the WPCL, and were therefore liable to the pension fund for unpaid contributions. J.A. 21a-24a.
The only state court decision to rule on the liability of corporate officers as employers under the WPCL is Ward v. Whalen, 18 Pa.D. & C.3d 710 (1981). In Ward the defendant who was the president and sole stockholder of Q-Dot, Inc., a bankrupt corporation, was held personally liable under the WPCL for the unpaid pension contribution. The defendant argued that under Section 260.3(b) 6 of the WPCL, which requires every employer who agrees to provide fringe benefits and make the requisite payment in 10 days, he could not be held liable as he was not a party to the collective bargaining agreement providing for the payment of pension benefits.
The court rejected the argument and found the defendant liable as an employer by definition. The court explained:
The legislature had some purpose for including an agent or officer of a corporation employing persons in the Commonwealth within the definition of employer, and the only apparent purpose was to subject these persons to liability in the event that a corporation or similar entity failed to make wage payments. Its reason for doing so is obvious. Decisions dealing with personnel matters and the expenditure of corporate funds are made by corporate officers and it is far more likely that the limited funds of an insolvent corporation will be used to pay wages and that a work force will be reduced while the corporation is still capable of meeting its obligations to its employes if personal liability is imposed on the persons who make these decisions.
Ward v. Whalen, 18 Pa.D. & C.3d at 712. The court's ruling in Ward was followed in In Re Johnston, 24 B.R. 685, 687 (Bkrtcy.Pa.1982).
Although "we are governed by state substantive law as pronounced by the state's highest court," Safeco Insurance Co. of America v. Wetherill, 622 F.2d 685, 687 (3d Cir.1980), citing Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886 (1967); Western Pennsylvania National Bank v. American Insurance Co., 428 F.2d 1220 (3d Cir.1970), the issue of the personal liability of a corporate officer pursuant to the WPCL has not been decided by the Pennsylvania Supreme Court or any Pennsylvania appellate court. In this case "our disposition ... must be governed by a prediction of how the state's highest court would decide were it confronted with the problem." McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 661 (3d Cir.), cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237 (1980). Thus, the trial court's decision in the Ward decision is entitled to "some weight," Safeco, 622 F.2d at 689, yet it is not controlling.
To us it is questionable whether the WPCL has so broad a scope that it imposes personal liability on those lower level corporate officers or employees who are merely implementing a policy at the command of their superiors; however, in this case we need not ascertain the breadth or outer limits of the ultimate coverage of the statute, because here there is no question that the legislature intended to include at least the highest ranking corporate officers, such as the Ambroses, who established and implemented the policy for the non-payment of the pension benefits. The Ambroses were the sole officers and the sole stockholders of the corporation. By an analysis of the related criminal penalty section statute, PA.STAT.ANN. tit. 43, Sec. 260.11a (Purdon Supp.1983-1984), and when reading the statute as a whole, it is obvious that the legislature intended to impose personal civil liability on persons who hold corporate executive positions such as occupied by the Ambroses. Corporate officers violating any of the WPCL provisions are subject to criminal penalties under Section 260.11a(c) which provides:
"[w]here such employer is a corporation, the president, secretary, treasurer or officers exercising corresponding functions [he or she] shall each be guilty of such summary offense."
PA.STAT.ANN. tit. 43, Sec. 260.11a(c) (Purdon Supp.1983-1984). Certainly, if the legislature intended to impose criminal liability on such corporate officers, there is no reason to believe that they intended to relieve those same corporate officers from personal civil liability.
Although imposing liability for unpaid pension benefits on persons who have not contractually agreed to make the payments seems a harsh result, in the absence of other available decisions on the issue, we will affirm the district court's decision holding the Ambroses personally liable under the WPCL for the delinquent pension benefit contributions.
The basis on which the district court imposed personal liability against the Ambroses under Section 301 LMRA is not clearly articulated; however, the court seemed to apply an alter ego theory to pierce the corporate veil, stating:
The close relationship between the individuals and the corporation and the fact that there are only two officers and the majority shareholders of the corporation would most likely support the conclusion that they are the employer and therefore within federal jurisdiction.
J.A. at 22a. The court also applied the WPCL definition of employer, stating that "the definition of 'employer' under Sec. 301 of the LMRA is at least as broad...
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