State v. L.V.I. Group

• Decision Date: 18 February 1997
• Docket Number: Docket No. KEN-95-279
• Citation: 690 A.2d 960
• Parties: STATE of Maine, et al., v. L.V.I. GROUP.
• Court: Maine Supreme Court

Page 960

690 A.2d 960

1997 ME 25

STATE of Maine, et al., v. L.V.I. GROUP.

Docket No. KEN-95-279.

Supreme Judicial Court of Maine.

Argued Dec. 7, 1995.

Decided Feb. 18, 1997.

Andrew Ketterer, Attorney General, Linda Conti (orally), Assistant Attorney General, Augusta, for plaintiff.

Nicholas Bull, (orally), Mark G. Furey, Thompson, McNaboe, Ashley & Bull, Portland, for defendant.

WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, RUDMAN, DANA, and LIPEZ, JJ.

CLIFFORD, Justice.

¶1 Lehigh Valley Group, Inc. (LVI) appeals from the judgment entered in the Superior Court (Kennebec County, Perkins, A.R.J.) in favor of the plaintiffs, the Director of the Bureau of Labor Standards and the State of Maine, in the State's action pursuant to 26 M.R.S.A. § 625-B (1988 & Supp.1996) ¹ to obtain severance pay on behalf of the former employees of Dori Shoe Company. LVI contends, inter alia, that the trial court erred in holding that a 1989 amendment to the statute, current subsection (1)(C), is constitutional. We affirm the judgment.

¶2 From 1967 until June 1985, Dori Shoe designed and manufactured women's footwear at its plant in Lewiston. LVI owned 100 percent of the stock of HMD Shoes, Inc., a holding company that in turn owned 100 percent of the stock of Dori Shoe until June 1985. LVI largely controlled all financial matters related to Dori Shoe and also influenced the company's hiring and licensing agreement decisions. In May of 1985, HMD entered into an option agreement with Poco Industries that allowed Poco to purchase fifty percent of Dori Shoe's stock. Dori Shoe began a series of employee layoffs in mid-June 1985. On June 28, 1985, Poco exercised its option to purchase fifty percent of Dori Shoe's stock from HMD.

¶3 By mid-August 1985, the entire Dori Shoe manufacturing work force, save for fourteen employees, had been terminated from employment. In November 1985, LVI directed Dori Shoe's comptroller to prepare a severance pay calculation in order to determine the amount of pay owed the employees due to the plant's closing. The amount calculated then was communicated to LVI in December 1985, but no severance pay ever was disbursed. In January 1986, LVI obtained permission from the Department of Commerce, which held a lien on Dori Shoe's plant and equipment following LVI's default on a government loan, to auction off the plant and equipment. On April 11, 1986, LVI auctioned off the plant and closed its doors.

¶4 LVI also had a similar relationship with another shoe company, Loree Footwear Corporation, a shoe manufacturing operation located in Freeport that closed in 1980. Loree was a wholly-owned subsidiary of Lehigh Footwear, Inc., that was in turn wholly-owned by LVI. When Loree ceased to operate, its employees brought an action against Loree, Lehigh, and LVI to recover severance pay pursuant to 26 M.R.S.A. § 625-B (1988). Loree was held liable as the employer, but the trial court rejected the former employees' argument and concluded that Lehigh and LVI, as parent corporations, were not "employers" within the meaning of section 625-B(1)(C) (1988). At the time of the lawsuit, section 625-B(1)(C) defined "employer" as "any person who directly or indirectly owns and operates a covered establishment." We affirmed the trial court in Curtis v. Lehigh Footwear, Inc., 516 A.2d 558 (Me.1986). Noting that the shareholders are not liable for corporate debts at common law, we concluded that the statutory wording "indirectly owns" in subsection (1)(C)'s definition of "employer" did not express a clear legislative intent to extend liability for severance pay to corporate shareholders. Id. at 560; see also Director of Bureau of Labor Standards v. Diamond Brands, Inc., 588 A.2d 734, 737 (Me.1991) (statutory definition of "employer" that includes "indirect owner" will not suffice as explicit derogation of successor corporations for debts of their transfers).

¶5 In the meantime, employees of Dori Shoe, those on whose behalf this suit is brought, brought suit against LVI. See Bernier v. Dori Shoe, et al., No. CV-86-244 (And.Cty.Sup.Ct.1986). Subsequent to the decision in Curtis, the trial court, on a M.R.Civ.P. 41(a) motion of the plaintiff employees, dismissed the action without prejudice.

¶6 In 1989, the Legislature amended the definition of "employer" in the statute to read:

"Employer" means any person who directly or indirectly owns and operates a covered establishment. For purposes of this definition, a parent corporation is considered the indirect owner and operator of any covered establishment that is directly owned and operated by its corporate subsidiary.

26 M.R.S.A. § 625-B(1)(C), as amended by P.L.1989, ch. 667, § 1 (emphasis added). The Legislature made the amendment retroactive to October 1, 1975. P.L.1989, ch. 667, § 2. The bill's statement of fact recited the reasoning behind the amendment:

[The amendment] includes parent corporations within the definition of "employer" for the entire severance pay law and makes the bill retroactive to October 1, 1975, the date on which the severance pay law took effect. This is done to clarify the original legislative intent of the law, which was incorrectly construed by the Law Court in Curtis v. Lehigh Footwear, Inc., 516 A.2d 558 (Me.1986), to exclude parent corporations from the definition of "employer."

Comm.Amend.A to L.D. 1891, Statement of Fact (114th Legis.1990).

¶7 In November 1990, the State brought the present action to recover severance pay on behalf of former Dori Shoe employees pursuant to the 1989 amendment. ² LVI moved for a summary judgment, contending that the retroactive application of the amendment is violative of the due process clauses of the Maine and United States Constitutions, Me. Const. art. I, § 6-A; U.S. Const. amend. XIV, § 1. ³ LVI also contends that the law violates the Declaration of Rights in art. I, § 1 of the Maine Constitution; the Takings Clauses of the Maine Constitution, art. I, § 21, and the United States Constitution, amend. V; the Public Purpose Clause of the Maine Constitution, art. IV, pt. 1 & 3; the Equal Protection Clauses of the Maine Constitution, art. I, § 6-A, and the United States Constitution, amend. XIV; that the calculation of severance pay by the trial court is inaccurate; and that the law is otherwise inapplicable. The court (Mead, J.) denied the motion, finding that LVI could be considered an "employer" for purposes of severance pay liability. Following a nonjury trial held to determine whether LVI was in fact the parent corporation of Dori Shoe Company and, thus, an "employer" for the purposes of the statute, the court (Perkins, A.R.J.) entered judgment for the State, holding LVI liable to the former employees for severance pay in the amount of $260,969.11. This appeal followed.

¶8 Legislative enactments are presumed constitutional. LVI bears the burden of proving that no conceivable state of facts exists to support the statute. Spare-Time Recreation, Inc. v. State, 666 A.2d 81, 82 (Me.1995). When possible, we will construe a statute to preserve its constitutionality. Maine Milk Producers, Inc. v. Commissioner of Agric., 483 A.2d 1213, 1218 (Me.1984).

¶9 In Norton v. C.P. Blouin, Inc., 511 A.2d 1056, 1060 n. 5 (Me.1986), we clarified the proper analysis concerning the retroactive application of statutes:

If the Legislature intends a retroactive application, the statute must be so applied unless the Legislature is prohibited from regulating conduct in the intended manner, and such a limitation upon the Legislature's power can only arise from the United States Constitution or the Maine Constitution.

A three-part test governs analysis under the due process clause of the Maine Constitution, Me. Const. art. I, § 6-A.

1. The object of the exercise must be to provide for the public welfare.

2. The legislative means employed must be appropriate to the achievement of the ends sought.

3. The manner of exercising the power must not be unduly arbitrary or capricious.

Tompkins v. Wade & Searway Const. Corp., 612 A.2d 874, 878 n. 2 (Me.1992) (citing State v. Eaton, 577 A.2d 1162, 1165-66 (Me.1990)) (emphasis in original) (citation omitted). This test is substantially similar to the analysis governing the United States Constitution. Tompkins v. Wade & Searway Const. Corp., 612 A.2d at 878 n. 2; see General Motors Corp. v. Romein, 503 U.S. 181, 191, 112 S.Ct. 1105, 1112, 117 L.Ed.2d 328 (1992). We have summarized the applicable standard as follows: "[T]he retroactive aspects of economic legislation meet the requirements of the due process clause if enacted to further a legitimate legislative purpose by rational means." Tompkins v. Wade & Searway Const. Corp., 612 A.2d at 877 (citing General Motors Corp. v. Romein, 503 U.S. at 191, 112 S.Ct. at 1112; Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 729, 104 S.Ct. 2709, 2717-18, 81 L.Ed.2d 601 (1984)).

¶10 LVI contends that due process considerations prohibit the Legislature from enacting a retroactive law that creates a new obligation, debt, or liability. LVI's challenge is made not to the general validity of the statute but, rather, to the amendment enacted by the Legislature following our holding in Curtis. LVI argues that although it was adjudicated in Curtis to be free of severance pay liability under the pre-amendment language of the statute, it now unfairly faces renewed liability due to the retroactive application of the amendment. We have held previously, although in a different context, that section 625-B does not violate due process even though it imposes liability based in part on past acts. Director of Bureau of Labor Standards v. Fort Halifax Packing Co., 510 A.2d 1054, 1062-63 (Me.1986) (application of statute would not result in unconstitutional impairment of contractual obligations and imposition of liability without due process), aff'd on other grounds sub nom. Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1...