Ferrara v. Smithtown Trucking Co.

• Decision Date: 10 July 2014
• Docket Number: No. 13–CV–3006 (JFB)(ARL).,13–CV–3006 (JFB)(ARL).
• Citation: 29 F.Supp.3d 274
• Parties: Joseph A. FERRARA, Sr., Frank H. Finkel, Marc Herbst, Denise Richardson, Thomas F. Corbett, Thomas Gesualdi, Louis Bisignano, Anthony D'Aquila, Michael O'Toole, and Benedetto Umbra, as Trustees and Fiduciaries of the Local 282 Pension Trust Fund, Plaintiffs, v. SMITHTOWN TRUCKING CO., INC., Defendant.
• Court: U.S. District Court — Eastern District of New York

29 F.Supp.3d 274

Joseph A. FERRARA, Sr., Frank H. Finkel, Marc Herbst, Denise Richardson, Thomas F. Corbett, Thomas Gesualdi, Louis Bisignano, Anthony D'Aquila, Michael O'Toole, and Benedetto Umbra, as Trustees and Fiduciaries of the Local 282 Pension Trust Fund, Plaintiffs,

v.SMITHTOWN TRUCKING CO., INC., Defendant.

No. 13–CV–3006 (JFB)(ARL).

United States District Court,

E.D. New York.

Signed July 10, 2014.

Joseph J. Vitale, Zachary N. Leeds, and Tzvi N. Mackson of Cohen, Weiss and Simon LLP, New York, NY, for Plaintiffs.

Richard B. Ziskin and Suzanne Harmon Ziskin of the Ziskin Law Firm, LLP, Commack, NY, for Defendant.

MEMORANDUM AND ORDER

JOSEPH F. BIANCO, District Judge:

The Trustees (“plaintiffs” or “Trustees”) of the Local 282 Pension Trust Fund (the “Fund”) bring this action for withdrawal liability against defendant Smithtown Trucking Co., Inc. (“defendant” or “Trucking”) pursuant to Sections 502, 515, 4212, and 4301 of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. Plaintiffs presently move to amend pursuant to Federal Rules of Civil Procedure 15(a), 20, and 21, to join Smithtown Concrete Products Corp. (“Concrete”) and Smithtown Realty Corp. (“Realty”) as defendants to hold them jointly and severally liable for Trucking's withdrawal liability. Plaintiffs contend both that the corporate veil among the entities should be pierced, and that the three companies are members of a commonly controlled group under ERISA. For the following reasons, the Court concludes that the proposed amendment is not futile, and, thus, grants plaintiffs' motion to amend and join Concrete and Realty.

I. Background

A. Factual Allegations

The Court takes the following facts from the proposed amended complaint. These are not findings of fact by the Court; instead, the Court assumes these facts to be true for purposes of deciding the pending motion.

1. Smithtown Trucking

Trucking is a party to a series of collective bargaining agreements with the Building Material Teamsters Local 282 (“Local 282”), which required Trucking to make contributions to the Fund. (Amended Complaint(“Am. Compl.”) ¶ 9.) In March 2011, Trucking permanently ceased to have an obligation to contribute, thereby withdrawing from the Fund within the meaning of Section 4203(a) of ERISA, 29 U.S.C. § 1383(a). (Am. Compl. ¶ 10.) In February 2012, the Fund assessed withdrawal liability totaling $698,436. ( Id. ¶ 11.) As of April 2013, the last month plaintiffs received a payment, Trucking had paid $41,790.52, leaving $656,645.48 due in withdrawal liability.¹ ( Id. ¶ 30.)

2. The Proposed Defendants

Trucking, Concrete, and Realty are owned by the same family, including Neil Spevack (“Spevack”); his sister, Sue Graze (“Graze”); and their respective children. ( Id. ¶ 31.) The companies previously were owned by Spevack's grandparents and their children. ( Id. ¶ 32.) According to plaintiffs, Spevack received sole ownership of Trucking, while ownership of Concrete and Realty nominally was transferred to Spevack and his family in virtually identical ownership amounts. ( Id. ¶¶ 33–34.) Plaintiffs, however, allege that Spevack maintains total actual ownership and operational control over the companies; the other members of his family have no actual business relationship with the companies (as owners, directors, officers, or employees), other than nominal involvement for purposes of obtaining bank accounts and other formalities. ( Id. ¶¶ 36–37.) Plaintiffs further allege that shareholder meetings and formal voting are not conducted, Spevack has total voting power, and Spevack is the principal and sole officer and director of all three companies. ( Id. ¶¶ 40–42.)

According to plaintiffs, the companies operated out of a single location in Smithtown, New York; Realty owns a portion of the property, which consists of a concrete factory, store, storage buildings, and yards, and Concrete owns the remainder. ( Id. ¶¶ 44–47.) Trucking stored its trucks on the property, loaded its trucks in the yard, and used common fuel tanks with Concrete. ( Id. ¶¶ 48–49.) Plaintiffs claim there was no written arrangement among the companies regarding the use of the property, Trucking almost never paid rent, and Realty's sole business purpose was owning its portion of the property. ( Id. ¶¶ 51–54.) In addition, plaintiffs claim that, while Trucking still operated, it made all of Concrete's deliveries, and its only work was delivering Concrete's materials to Concrete's customers. ( Id. ¶ 60.) Relatedly, plaintiffs claim that customers were led to believe the two entities were a single integrated operation, all customer payments were invoiced and made to Concrete, and Trucking never received any actual revenue other than payments from Concrete to cover Trucking's costs. ( Id. ¶¶ 61–62.) Thus, plaintiffs allege that, by design, Trucking never earned a profit. ( Id. ¶ 65.)

In all, plaintiffs allege that there was no formal arrangement governing the interactionsbetween the companies, including employee or vendor sharing, payments for costs, compensation for expenditures, revenue sharing, and the companies' financial relationships. ( Id. ¶¶ 76–79.) Plaintiffs allege that financial transactions among the companies were made by their outside accountant, with Spevack's consent, solely to reduce the companies' and Spevack's tax burden. ( Id. ¶ 80.) Thus, they claim that the companies were run as a single, fully integrated operation. They accordingly seek to impose withdrawal liability on Concrete and Realty on the theory that the three companies are members of a single control group ( see id. ¶ 82); or are a single entity that share an alter ego, single employer, and/or joint employer relationship with each other, such that the corporate veil should be pierced among them ( id. ¶ 84). ( See also Am. Compl., at Prayer for Relief ¶ 1.)

B. Procedural Background

Plaintiffs commenced this action on May 22, 2013. Defendant answered on August 2, 2013. Plaintiffs moved to amend on April 30, 2014. Defendant opposed on May 21, 2014. Plaintiff replied on June 2, 2014. The Court held oral argument on July 9, 2014.² The matter is fully submitted.

II. Standard of Review

A. Motion to Amend

Federal Rule of Civil Procedure 15 applies to motions to amend the pleadings once the time for amending a pleading as of right has expired. “The court should freely give leave [to amend] when justice so requires,” Fed.R.Civ.P. 15(a); a motion to amend should be denied “only for reasons such as undue delay, bad faith, futility of the amendment or prejudice to the other party.” Crippen v. Town of Hempstead, No. 07–CV3478 (JFB)(ARL), 2013 WL 2322874, at *1 (E.D.N.Y. May 22, 2013); see Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 126 (2d Cir.2008) (per curiam) (“[M]otions to amend should generally be denied in instances of futility, undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, or undue prejudice to the non-moving party.”). “An amendment to a pleading is futile if the proposed claim could not withstand a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).” Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir.2002) (citing Dougherty v. N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 88 (2d Cir.2002)).

B. Joinder of Parties³

Federal Rule of Civil Procedure 21 provides that, “[o]n motion or on its own, the court may at any time, on just terms, add or drop a party.” Fed.R.Civ.P. 21. Federal Rule of Civil Procedure 20(a)(2) permits the joinder of persons as defendants in an action if “(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction or occurrence or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action.” Fed.R.Civ.P. 20(a)(2). According to the Supreme Court, “joinder of claims, parties and remedies is strongly encouraged,” and “the impulse is toward the broadest possible scope of action consistent with fairness to the parties.” United Mine Workers v. Gibbs, 383 U.S. 715, 724, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966); see also Roll On Express, Inc. v. Travelers Indem. Co. of Conn., No. 09–CV–213 (RLM), 2009 WL 1940731, at *2 (E.D.N.Y. July 2, 2009). Thus, “[l]ike Rule 15, the requirements of Rule 20(a) should be interpreted liberally in order to enable the court to promote judicial economy by permitting all reasonably related claims for relief by or against different parties to be tried in a single proceeding.” Liegey v. Ellen Figg, Inc., No. 02 Civ.1492 JSM JCF, 2003 WL 21361724, at *3 (S.D.N.Y. June 11, 2003) (internal quotation marks and citation omitted).

III. Discussion

Plaintiffs move to join Concrete and Realty to hold them liable by piercing the corporate veil and/or as members of a commonly controlled group under ERISA. Trucking does not argue that the amendment is untimely, brought in bad faith, or prejudicial, or that plaintiffs cannot satisfy the precepts of Federal Rule of Civil Procedure 20. Instead, it argues that the Court would lack subject matter jurisdiction over Concrete and Realty, the motion is deficient because it lacks evidentiary support, and the amendment is futile. The Court addresses each contention, in turn.

A. Threshold Issues

1. Subject Matter Jurisdiction

Trucking, relying on Peacock v. Thomas, 516 U.S. 349, 116 S.Ct. 862, 133 L.Ed.2d 817 (1996), argues that the Court lacks subject matter jurisdiction to permit the proposed amendment to the complaint.

In Peacock, a plaintiff who had obtained an ERISA judgment against his former employer filed a second action, purportedly under ERISA, seeking to pierce his employer's corporate veil and hold personally liable the defendant, an officer and shareholder of plaintiff's former employer. 516 U.S. at 351, 116 S.Ct. 862. The Supreme Court held, inter alia, that it lacked...