Hawaii Carpenters Trust Funds v. Waiola Carpenter Shop, Inc.

• Decision Date: 27 July 1987
• Docket Number: No. 86-1824,86-1824
• Citation: 823 F.2d 289
• Parties: 125 L.R.R.M. (BNA) 3442, 56 USLW 2164, 107 Lab.Cas. P 10,069, 8 Employee Benefits Ca 2342 HAWAII CARPENTERS TRUST FUNDS (Health & Welfare Trust Funds by its Trustees Raymond Nagata, Albert Hamamotio, Henry Iida, Roy Iwamoto, Robert Kaya, Fred Shelton, Harold Makilan, Herman Nascimento, Lester Tamura and Mitsuo Yakuma, et al.), Plaintiffs-Appellants, v. WAIOLA CARPENTER SHOP, INC., a Hawaii corporation, and Tanaka and Uyehara, Inc., a Hawaii corporation, now doing business as Waiola Countertop, formerly doing business as Waiola Carpenter Shop, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 289

823 F.2d 289

125 L.R.R.M. (BNA) 3442, 56 USLW 2164,

107 Lab.Cas. P 10,069,

8 Employee Benefits Ca 2342

HAWAII CARPENTERS TRUST FUNDS (Health & Welfare Trust Funds by its Trustees Raymond Nagata, Albert Hamamotio, Henry Iida, Roy Iwamoto, Robert Kaya, Fred Shelton, Harold Makilan, Herman Nascimento, Lester Tamura and Mitsuo Yakuma et al.), Plaintiffs-Appellants, v. WAIOLA CARPENTER SHOP, INC., a Hawaii corporation, and Tanaka and Uyehara, Inc., a Hawaii corporation, now doing business as Waiola Countertop, formerly doing business as Waiola Carpenter Shop, Defendants-Appellees.

No. 86-1824.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 5, 1986.

Decided July 27, 1987.

Wesley H. Ikeda, Honolulu, Hawaii, for plaintiffs-appellants.

Gregory M. Sato, Honolulu, Hawaii, for defendants-appellees.

Appeal from the United States District Court for the District of Hawaii.

Before NELSON, REINHARDT and WIGGINS, Circuit Judges.

REINHARDT, Circuit Judge:

Hawaii Carpenters' Trust Funds, employee benefit trusts established pursuant to the Labor Management Relations Act (LMRA), 29 U.S.C. Sec. 186(c), and the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Sec. 1101 et seq., brought suit to recover unpaid ERISA trust fund contributions from Tanaka & Uyehara, Inc. According to the Trust Funds, T & U was obligated to contribute monies under the 1978-81 collective bargaining (Mill Cabinet) agreement as a successor employer to the original signatory and under the 1981-84 collective bargaining agreement as a member of a multiemployer bargaining association (WPA). The district court granted T & U's motion for summary judgment. Hawaii Carpenters' Trust Funds v. Waiola Carpenter Shop, Inc., 627 F.Supp. 237 (D.Hawaii 1985). The Trust Funds appeal. We reverse.

I. Facts

Waiola Carpenter Shop, Inc., entered into a collective bargaining agreement with the United Brotherhood of Carpenters & Joiners of America, Local 745, AFL-CIO (Carpenters' Union) for the period 1978-1981. The standard "Mill Cabinet Agreement" was executed on behalf of the company by its owner Robert Imai. The agreement obligated signatories to make contributions to the various Hawaii Carpenters' Trust Funds. At the beginning of the contract period, Waiola employed two workers, Calvin Tanaka and Duffy Uyehara. Both were union members. Imai also performed work in the shop, primarily the delivery of finished products and the pickup of raw materials.

In late 1979, Tanaka and Uyehara formed a corporation, Tanaka and Uyehara, Inc. (T & U), and purchased Waiola Carpenter Shop from their employer, Imai. The changeover in ownership was effective May 1, 1980. In an effort to promote their new business, Tanaka and Uyehara sent the following notice to Waiola's customers:

Dear Waiola Carpenter Shop Customers:

Effective May 1, 1980, Waiola Carpenter Shop ... will be under the new management of Calvin Tanaka and Duffy Uyehara.... If you are presently doing business with us, we appreciate your patronage and we will continue to provide you with quality service and workmanship. We will operate with the same street address, telephone number, business office location, policies and personnel.... We have been very pleased to work with you in the past and look forward to this opportunity for the future.

T & U continued to operate the business under the name Waiola Carpenter Shop for some period, but later adopted the trade name "Waiola Countertop."

After their purchase of Waiola, Tanaka and Uyehara continued to perform their former duties in the fabricating shop. They also hired a series of non-union employees to perform the duties Imai had previously performed. None of the subsequently hired employees was a union member.

From May 1980 through December 1981, T & U received monthly trust fund assessment notices from the Hawaii Carpenters' Funds, pursuant to the 1978-81 Mill Cabinet Agreement. T & U continued to report the hours worked by all of its employees, including Tanaka and Uyehara. Although it continued to make contributions for Tanaka and Uyehara, it failed to make them for the non-union employees who assumed Imai's duties. Both Tanaka and Uyehara submitted claims for benefits under the various funds. During this period, Tanaka's rights under the pension trust fund became vested and Uyehara acquired additional vested benefits.

On December 23, 1981, T & U received a letter from the Trust Funds demanding payment of delinquent contributions, primarily for the non-union employees. T & U did not make the requested contribution. Moreover, beginning January 1982, T & U ceased contributing to the Funds entirely and stopped reporting hours worked.

The Mill Cabinet Agreement expired on July 31, 1981. Earlier that year, T & U had joined the Building Industry Association of Hawaii and had thereby become a member of the Wood Products Association of Hawaii (WPA), an affiliated organization. In July, Percy Ching, President of the WPA, visited T & U and asked Uyehara to sign a "survey form." The form authorized the WPA, a multiemployer bargaining association, to represent the signatory's interests in the upcoming negotiations with the Carpenters Union. Uyehara executed the form on behalf of T & U; ¹ both T & U and the WPA subsequently referred to the form as a power of attorney. Uyehara or Tanaka occasionally attended meetings of the WPA, at some of which progress of the labor negotiations was reported on. Neither participated in any of the actual negotiating sessions between the WPA and the union.

The WPA, a multiemployer association, commenced negotiations on behalf of its members with the Carpenters' Union in August 1981. On September 2, 1981, Percy Ching, president of the WPA, sent a memorandum to "Millwork Industry Signatories" including T & U, announcing that a tentative agreement had been reached. As the memorandum stated:

If approved, the contract will bind all Association members and other non-member firms which have given the power-of-attorney to the Association to represent them in negotiations.

Shortly afterwards, a dispute arose that resulted in a strike and a lawsuit by the union. The strike was eventually settled, the suit dismissed, and a formal collective bargaining agreement was entered into on February 25, 1983. The agreement was made retroactive to August 1, 1981. ² It was expected that each member of the multiemployer association would sign the agreement. T & U refused to do so.

On January 14, 1982, slightly more than a year before the formal agreement with the union was reached, T & U purported to withdraw from the multiemployer association. While conceding that it had given WPA its "power of attorney for bargaining purposes," T & U claims to have been deceived by Percy Ching, President of the WPA, as to the effect of signing the form. ³ According to the district court, "Ching had represented to Tanaka and Uyehara that despite their signatures on the "Survey Form" (or power of attorney), each company would have the option of signing their own agreement." 627 F.Supp. at 242. The court also stated that "Percy Ching advised Tanaka and Uyehara extensively on labor matters. In fact, both parties agreed Mr. Ching may have been practicing law without a license." Id. at 240. About two weeks after Uyehara's letter purporting to withdraw from the WPA, both Uyehara and Tanaka resigned from the union.

Neither the Union nor the Funds were notified that T & U had sought to withdraw from the WPA until after the agreement on the new contract had been reached. In March of 1983, representatives from the Carpenters' Union twice asked Uyehara to sign the contract on behalf of T & U. Uyehara refused, citing for the first time the purported withdrawal. ⁴

On March 4, 1983, Hawaii Carpenters' Funds filed suit against Waiola Carpenter Shop, Inc. and T & U to recover delinquent trust fund contributions under the 1978-81 Mill Cabinet Agreement. Three months later, the Funds amended the complaint to include unpaid contributions under the 1981-84 collective bargaining agreement. The district court granted defendants' motion for summary judgment on both counts. As to the 1978-81 agreement, the court ruled that T & U was not a "successor employer" to Waiola Carpenter Shop, and, accordingly, was not bound by Waiola's collective bargaining obligations. As to the 1981-84 agreement, the court found that Ching's representations to T & U constituted "unusual circumstances" justifying T & U's withdrawal from the multiemployer association. In addition, the court ruled that a one year state statute of limitations was applicable to both actions. The court erred with respect to all three rulings. ⁵

II. T & U's Successorship and Obligation Under the 1978-81 Mill Cabinet Agreement

The Funds contend that T & U was a "successor employer" to Waiola and thus obligated to contribute to the employee benefit trusts under the 1978-81 collective bargaining agreement. T & U argues that it was not a "successor" and was not bound by the terms of the collective bargaining agreement.

In a series of cases, we have set forth the requirements for finding that a new employer is a "successor employer." NLRB v. Jeffries Lithograph Co., 752 F.2d 459, 463-69 (9th Cir.1985); Kallmann v. NLRB, 640 F.2d 1094, 1100-01 (9th Cir.1981); Premium Foods, Inc. v. NLRB, 709 F.2d 623, 627 (9th Cir.1983). As the Supreme Court has stated, "the focus is on whether there is 'substantial continuity' between the enterprises." Fall River Dyeing & Finishing Corp. v. NLRB, --- U.S. ----, 107 S.Ct. 2225, 2236, 96 L.Ed.2d 22 (1987). The inquiry we undertake is more functional than formal.

In Jeffries Lithograph, we listed a number of factors to be considered in making a determination of successorship. Those factors include [Whether] [a] there has been a substantial continuity of the same business operations; [b] the new employer uses the same plant; [c] the same or substantially the same work...