US v. MPM Contractors, Inc.

• Decision Date: 18 April 1991
• Docket Number: Civ. A. No. 89-2371-0.
• Citation: 763 F. Supp. 488
• Parties: The UNITED STATES of America, Plaintiff, v. MPM CONTRACTORS, INC., W.A. Michaelis, Michael P. McGill, Individually, and Asbestos Removal Contractors, Inc., Defendants.
• Court: U.S. District Court — District of Kansas

763 F. Supp. 488

The UNITED STATES of America, Plaintiff, v. MPM CONTRACTORS, INC., W.A. Michaelis, Michael P. McGill, Individually, and Asbestos Removal Contractors, Inc., Defendants.

Civ. A. No. 89-2371-0.

United States District Court, D. Kansas.

April 18, 1991.

Janice M. Karlin, U.S. Atty.'s Office, Henry F. Rompage, U.S. E.P.A., Kansas City, Kan., Richard B. Stewart, Beverlee J. Destein, Environment and Natural Resources Div., U.S. Dept. of Justice, Clarence Featherson, U.S. E.P.A., Washington, D.C., for plaintiff.

John S. Seeber, Adams, Jones, Robinson & Malone, Gerald N. Capps, Jr., Richard D. Greene, Morris, Laing, Evans, Brock & Kennedy, Wichita, Kan., for W.A. Michaelis.

Frederick K. Starrett, Lathrop, Norquist & Miller, Overland Park, Kan., for Michael P. McGill and Asbestos Removal Contractors, Inc.

MEMORANDUM AND ORDER

EARL E. O'CONNOR, Chief Judge.

This matter comes before the court on the motion of plaintiff United States of America for a preliminary injunction against MPM Contractors, Inc. (hereinafter "MPM"), Asbestos Removal Contractors, Inc. (hereinafter "ARC"), and Michael P. McGill (hereinafter "McGill"), individually, pursuant to Rule 65(a) of the Federal Rules of Civil Procedure. The United States seeks to prohibit MPM, ARC, and McGill from disturbing the status quo and moving any assets beyond the jurisdiction of the court and the reach of plaintiff.

The court held an evidentiary hearing on the merits of the government's request on Friday, March 29, 1991. At the conclusion of the hearing, the court entered a temporary restraining order against defendant MPM until further notice, prohibiting MPM, its owners, directors, officers, employees, and anyone else acting for MPM from selling, transferring, encumbering, otherwise disposing of its assets, or doing anything to upset the status quo. For the reasons stated below, the court will grant the motion of the United States for a preliminary injunction against all of the defendants.

FINDINGS OF FACT

1. Defendant MPM has been engaged in the business of asbestos removal since 1985. The company has been hired to remove asbestos from a variety of commercial projects: offices, schools, churches, and hospitals. MPM also works on demolition, renovation, and remodeling jobs. Connie McGill, the wife of defendant Michael P. McGill, owns all shares of stock in MPM, but she has not received any dividends. She is a homemaker. Her husband, the general manager of MPM, is the company's only remaining employee. His past duties as general manager included hiring the corporation's asbestos abatement workers, bidding for contracts, signing for loans on behalf of the company, endorsing MPM's checks, representing MPM before regulatory agencies, and signing the corporation's applications for licenses. His only function with MPM at this time is "selling off material assets of the company and collecting money owing to it."

2. The court held in its memorandum and order entered on October 2, 1990, that MPM violated the National Emissions Standards for Hazardous Air Pollutants (hereinafter "NESHAP") for asbestos, promulgated under sections 112 and 114 of the Clean Air Act, 42 U.S.C. §§ 7412 and 7414, while removing asbestos from Chandler Hall at Pittsburg State University, Pittsburg, Kansas, Quivera Junior High School in Holyrood, Kansas, and the Wolcott Building in Hutchinson, Kansas.

3. The United States seeks civil penalties for MPM's previous violations of the Act and injunctive relief to prohibit defendant from continuing to violate the NESHAP standards and the Clean Air Act. Any person who violates the Act is subject to a civil penalty not to exceed $25,000.00 per day for each violation. 42 U.S.C. § 7413(b). Defendant's seventeen daily violations of the Act, at $25,000 per violation, makes MPM liable for a maximum penalty of $425,000.00.

4. McGill provided information concerning MPM's financial condition to Dunn and Bradstreet (hereinafter "D & B"). A report compiled by D & B in 1989 indicated that MPM had $1,374,685 in sales, operating expenses of $117,803, $200,029 in costs for goods sold, a gross profit of $1,374,685, and retained earnings of $120,065. MPM's total assets as of October 10, 1990, were listed as $202,764. MPM contends its net worth was only $75,000 in August of 1990.

5. MPM and ARC designated McGill, pursuant to Rule 30(b)(6) of the Federal Rules of Civil Procedure, as the person with knowledge of the financial condition of each company. McGill was deposed by the United States on February 20 and 21, 1991. At that time, he testified that a post office box was the only remaining asset of MPM. He added that MPM currently has "maybe $15,000 worth of potential receivables ... probably $15,000 to maybe $25,000 in potential other equipment and materials ... and ... a little bit of cash in the bank ... probably $5,000." MPM presently owes the State of Kansas $9,000.00 in fines, and ostensibly owes ARC $6,625.00.¹ These two debts gave MPM a negative balance of over $2,000.00.

6. McGill earns a base salary of $600 per week ($31,200/year) as the general manager of MPM. His base salary is generously supplemented by bonuses. The method in which MPM disburses bonuses to McGill is not in writing. McGill testified that he "could get paid more" when the company made more money. He received an income of approximately $142,000 in 1988. The next year, 1989, his income was approximately $108,000. His income from MPM dropped to $32,500 in 1990.

7. ARC was originally incorporated by Earl A. Steward, III (hereinafter "Steward"), a home builder, in June of 1990. Steward contracted through Envoy Business Brokers (hereinafter "Envoy") to purchase equipment and supplies from MPM for $100,000. The business assets were to be bought for $90,000 and $10,000 was to be paid for a noncomplete agreement with McGill. The signed Consulting and Referral Agreement has several initialed changes, but the first sentence of the agreement with the effective changes reads: "Earl A. Steward III and C. Kay Steward hereinafter referred to as `Buyer' and Michael P. McGill, Inc. hereinafter referred to as `Seller' have this date signed a purchase agreement." (emphasis added).

8. An unsigned draft Covenant Not to Compete Agreement dated June 26, 1990, between ARC and "Michael P. McGill, Connie L. McGill, and Mary L. McGill, hereinafter referred to as `Covenantors'" stated:

WHEREAS, each Covenantor is either a director, officer or stockholder of MPM Contractors, Inc., a Kansas corporation

...

When deposed, McGill testified that while he was neither a director, officer, nor stockholder of MPM, "I think that the people involved in the purchase of MPM assets thought I was one or more of all of the above." The Sales Agreement was contingent upon Steward's ability to obtain financing. Steward failed to acquire the funding. The Sales Agreement was therefore canceled.

9. ARC's "major business activity" in Kansas is asbestos removal. The company also engages in interior finishes. McGill purchased every share of stock in ARC for a total of $1,750.00 on October 10, 1990. He receives a base salary of $600 per week from ARC. McGill has, on behalf of ARC, telephonically bid ten to twelve asbestos jobs, and visited two sites in order to bid asbestos jobs. Immediately after purchasing stock ownership of ARC, McGill transferred MPM's assets to ARC in exchange for $18,375. MPM, however, was not paid for the equipment and materials until December 24, 1990.

10. Defendant ARC's purchase included three vehicles from MPM which, as of February 21, 1991, had not been retitled in ARC's name, nor had the insurance on the vehicles been transferred from MPM to ARC. An appraiser hired by MPM, John R. Harris (hereinafter "Harris"), reported a fair market value of $18,278.00 for a check-writer, refrigerator, microwave oven, and most of the other items sold by MPM to ARC.

11. McGill testified that "I had much influence in selling MPM's assets and materials because I was the manager of the company." Before the preliminary injunction hearing, this transaction appeared to include a transfer of virtually all MPM assets to ARC. A form supplementing MPM's license application states that "MPM has sold all its equipment to ARC and at this time is leasing equipment on a will call basis." McGill's deposition testimony indicates that a post office box was all that remained of MPM's assets. His testimony from the March 29 hearing reveals, however, that more MPM property has surfaced. The equipment of both corporations is housed at the same location — 215 South Pattie Street, Wichita, Kansas.

12. Very few corporate records were made of transactions between MPM and ARC. McGill testified that MPM failed to observe corporate formalities when he loaned $25,000 to ARC on December 24, 1990. There are no writings that document the terms of the loan. He states that $18,375.00 of this money was paid to MPM for the assets taken two and one-half months earlier. The remaining $6,625.00 was a loan from ARC to MPM. As of March 29, MPM had not repaid the loan which was due on March 24, 1991.

13. McGill appears to have used the property of each company interchangeably to conduct his business affairs. He used a MPM check to pay for an ARC Kansas Department of Health and Environment (hereinafter "KDHE") notification filing fee for an asbestos removal job in Salina, Kansas, which had been contracted by MPM. He also sent correspondence on ARC stationary to the KDHE on behalf of MPM. MPM's telefax was also used by McGill to send a message on behalf of ARC to the same government agency.

14. MPM and ARC operated under the same type of license issued by the State of Kansas for asbestos removal. In fact, the same equipment, once owned by MPM but now held by ARC, was used to obtain both licenses. The two companies also enter bids to remove asbestos from the same type of buildings: schools, churches, and hospitals. MPM and ARC also share the...