UA Local 343 United Ass'n of Journeymen & Apprentices of Plumbing and Pipefitting Industry of U.S. and Canada, AFL-CIO v. Nor-Cal Plumbing, Inc., AFL-CIO

• Decision Date: 28 February 1995
• Docket Number: 343 and 444,No. 92-15749,NOR-CAL,No. 343,Nos. 159,AFL-CIO,343,342,s. 159,R-CAL,92-15749
• Citation: 48 F.3d 1465
• Parties: 130 Lab.Cas. P 11,315, Pens. Plan Guide P 23908L UA LOCAL 343 OF the UNITED ASSOCIATION OF JOURNEYMEN & APPRENTICES OF the PLUMBING AND PIPEFITTING INDUSTRY OF the UNITED STATES AND CANADA,; UA Local, and 444 Combined Pension Trust Fund; UA LocalCombined Health & Welfare Trust Fund; and UA LocalJourneyman and Apprentice Training Trust Fund, Plaintiffs-Appellees, v.PLUMBING, INC.; Elmar Lee Pettit; North Bay Plumbing, Inc.; Audrey Jean Pettit, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1465

48 F.3d 1465

130 Lab.Cas. P 11,315, Pens. Plan Guide P 23908L

UA LOCAL 343 OF the UNITED ASSOCIATION OF JOURNEYMEN &

APPRENTICES OF the PLUMBING AND PIPEFITTING INDUSTRY OF the

UNITED STATES AND CANADA, AFL-CIO; UA Local Nos. 159, 342,

343, and 444 Combined Pension Trust Fund; UA Local Nos.

159, 342, 343 and 444 Combined Health & Welfare Trust Fund;

and UA Local No. 343 Journeyman and Apprentice Training

Trust Fund, Plaintiffs-Appellees, v. NOR-CAL PLUMBING, INC.; Elmar Lee Pettit; North Bay

Plumbing, Inc.; Audrey Jean Pettit, Defendants-Appellants.

No. 92-15749.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Dec. 16, 1992.

Decided Oct. 14, 1994.

As Amended Feb. 28, 1995.

John M. Kelson, Oakland, CA, for defendants-appellants North Bay Plumbing, Inc. and Audrey Jean Pettit.

Mark R. Thierman, Thierman, Cook, Brown & Prager, San Francisco, CA, for defendants-appellants Nor-Cal Plumbing, Inc. and Elmar Lee Pettit.

John J. Davis, Jr., McCarthy, Johnson & Miller, San Francisco, CA, for plaintiffs-appellees.

Prior Report: 38 F.3d 1467.

Appeal from the United States District Court for the Northern District of California.

Before: NORRIS, BEEZER, and KLEINFELD, Circuit Judges.

WILLIAM A. NORRIS, Circuit Judge:

Appellant Elmar Lee Pettit is a plumbing contractor who, with appellant Audrey Pettit, his wife, owns both Nor-Cal Plumbing, Inc. and North Bay Plumbing, Inc. Nor-Cal is union, and North Bay is non-union. Appellees, Local 343 and the employee trust funds in which it participates, brought this action under Section 301 of the Labor Management Relations Act ("LMRA") and Section 502 of the Employee Retirement Income Security Act ("ERISA"), seeking damages for breach of the Nor-Cal collective bargaining agreement. The action is premised on the theory that the collective bargaining agreement between Local 343 and Nor-Cal covered North Bay as well because North Bay was the alter ego of Nor-Cal.

On the basis of "an undisputed record of fraud, deception and obstruction," the district court ruled on summary judgment that North Bay was the alter ego of Nor-Cal. Order Granting Summary Judgment at 10 (quoting Order of May 24, 1988). Consequently, the court held that appellants breached the collective bargaining agreement by failing to extend its terms and conditions of employment to North Bay employees. The district court awarded appellees $2.5 million in fringe benefit contributions, liquidated damages, interest, attorneys' fees and costs, and $2 million in punitive damages. Judgment was entered not only against Nor-Cal on the theory that North Bay was its alter ego, but also against the Pettits in their individual capacities on the theory that appellants were entitled to pierce the corporate veil. On appeal, the defendants-appellants argue that the district court erred in granting summary judgment against Nor-Cal on the alter-ego theory, in failing to find the action time barred, in piercing the corporate veil to impose liability on the Pettits personally, and in awarding punitive damages. We uphold the court's ruling that the statute of limitations does not bar this action, but reverse summary judgment against Nor-Cal under the alter-ego theory and against the Pettits under the veil piercing doctrine. Because we reverse summary judgement, we vacate the award for punitive damages.

I Primary Jurisdiction

As a preliminary matter, appellants argue that the doctrine of primary jurisdiction barred the district court from extending the Nor-Cal collective bargaining agreement to North Bay unless and until the National Labor Relations Board first determined that the employees of both firms constituted an appropriate bargaining unit. See Brotherhood of Teamsters, Local No. 70 v. California Consolidators, Inc., 693 F.2d 81, 82-83 (9th Cir.1982), cert. denied, 469 U.S. 887, 105 S.Ct. 263, 83 L.Ed.2d 199 (1984). This argument misunderstands the differences between the two theories with which an illegal "double breasted" operation can be challenged.

Appellants are correct that it may be perfectly legal for a contractor to conduct business through a "double breasted" operation, one in which the same contractor owns both union and non-union companies for legitimate business purposes. ¹ In such cases, the collective bargaining agreement of the union firm does not ordinarily apply to the non-union firm. Out of concern, however, that some contractors would use double-breasted operations to avoid their collective The requirements of these two theories overlap substantially. Under both theories, the district court must first determine whether the two firms are a single employer by measuring the degree of common ownership, management, operations, and labor relations. See id. at 1276. If this threshold requirement is met, the next step depends on which theory is pursued.

bargaining obligations, the courts and the NLRB have developed two conceptually related, but distinct theories--"single employer" and "alter ego"--to guard against such abuse. Carpenters' Local Union No. 1478 v. Stevens, 743 F.2d 1271, 1275-77 (9th Cir.1984), cert. denied, 471 U.S. 1015, 105 S.Ct. 2018, 85 L.Ed.2d 300 (1985).

Under the "single employer" theory, the district court must defer to the NLRB, which has primary jurisdiction to determine whether the employees of both the union and non-union firms constitute an appropriate bargaining unit. Only if the NLRB finds that they constitute a single unit may the collective bargaining agreement with the union firm be extended to the non-union firm. See South Prairie Constr. Co. v. Local No. 627, Int'l Union of Operating Eng'rs, 425 U.S. 800, 805-06, 96 S.Ct. 1842, 1844-45, 48 L.Ed.2d 382 (1976) (per curiam); Carpenters' Local Union No. 1478, 743 F.2d at 1276-77 n. 7; N.L.R.B. v. Don Burgess Constr. Corp., 596 F.2d 378, 386 (9th Cir.), cert. denied, 444 U.S. 940, 100 S.Ct. 293, 62 L.Ed.2d 306 (1979). This is because the fact that Nor-Cal and North Bay may constitute a single employer does not necessarily mean that their employees share a "community of interests" sufficient to make them a single bargaining unit. See Don Burgess, 596 F.2d at 386. This bargaining unit issue, which is a representational question, must be decided by the NLRB in the first instance. See 29 U.S.C. Sec. 159(b) ("The Board shall decide in each case ... [what] the unit appropriate for the purposes of collective bargaining shall be...."); Carpenters' Local Union No. 1478, 743 F.2d at 1278; Cappa v. Wiseman, 659 F.2d 957, 959 (9th Cir.1981).

Accordingly, if appellees had relied solely on the "single employer" theory, appellants would have prevailed on their primary jurisdiction argument. The district court could not have extended the collective bargaining agreement to North Bay without a prior determination by the NLRB that the employees and North Bay and Nor-Cal constituted a single bargaining unit.

But appellees bypassed the "single employer" theory and instead invoked the "alter ego" theory. To prevail on the "alter ego" theory, appellees were required not only to make the threshold showing that the two firms were a single employer, but also to prove that North Bay was being used "in a sham effort to avoid collective bargaining obligations," Brick Masons Pension Trust v. Industrial Fence & Supply, Inc., 839 F.2d 1333, 1336 (9th Cir.1988), rather than for the pursuit of legitimate business objectives untainted by "union animus," Haley & Haley, Inc. v. NLRB, 880 F.2d 1147, 1150 (9th Cir.1989) (per curiam). See also A. Dariano & Sons, Inc. v. District Council of Painters No. 33, 869 F.2d 514, 519 (9th Cir.1989) ("In all alter ego determinations an element of fraud or misrepresentation also exists."). It is the settled law of our circuit that once appellees prevailed on these issues, the district court could hold that the Nor-Cal bargaining agreement covered North Bay without first getting a unit determination from the NLRB. See, e.g., Northwest Adm'rs, Inc. v. Con Iverson Trucking, Inc., 749 F.2d 1338, 1340 (9th Cir.1984); Carpenters' Local Union No. 1478, 743 F.2d at 1276-77 ("[A] showing [that employees of both companies constitute a single bargaining unit] is not required under the alter ego doctrine."). ²

Relying on Laborers Health & Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484 U.S. 539, 108 S.Ct. 830, 98

                L.Ed.2d 936 (1988), appellants also assert that ERISA does not provide the district court jurisdiction to enforce a collective bargaining agreement with North Bay employees who are not signatories to the Nor-Cal labor agreement.  Advanced Lightweight Concrete provides appellants no support, however, because the Court said ERISA provides no jurisdiction to enforce noncontractual obligations, specifically, an employer's obligation under the National Labor Relations Act to make pension fund contributions post-contract.  See id. at 548-49, 108 S.Ct. at 835-36.   Because the case at bar concerns contractual obligations, namely the employer's obligation to contribute during the agreement's term, jurisdiction under ERISA was also proper
                

II

Alter Ego

A

Standard of Review

On the merits, appellants claim that the grant of summary judgment on the "alter ego" theory was inappropriate. The alter ego test is, as they contend, highly fact specific. See Local Joint Exec. Bd., Culinary Workers Union, Local 226 v. Royal Center, Inc., 796 F.2d 1159, 1164 (9th Cir.1986), cert. denied, 479 U.S. 1033, 107 S.Ct. 881, 93 L.Ed.2d 835 (1987); J.M. Tanaka Constr., Inc. v. NLRB, 675 F.2d 1029, 1033 (9th Cir.1982). Applying the standard test for summary judgment, we review the district court's decision de novo to decide whether a genuine issue of material fact exists. See Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.1986).

Because appellees had the burden of proof on the question of alter ego, they had the burden of establishing a prima facia case on their motion for summary judgement. Celotex Corp. v....