Nor-Cal Plumbing, and then have a non-union shop."
Defendants transferred Nor-Cal's major customers to North Bay, including the two largest, Lewis Homes and Presley Homes. Frank Hodel, who was supposedly in charge of North Bay, has testified that he was surprised by the transfer of the Presley Homes account, which took place when Mr. Pettit was on a fishing trip in Mexico with Garth Patterson, Presley's vice president. Kaufman and Broad's Bradbury Homes project was taken over by North Bay in the middle of the job, as testified by Cliff Russell. The person Mr. Russell dealt with for both Nor-Cal and North Bay was Mr. Pettit.
Defendants' assertion that Nor-Cal was unable to bid competitively is not supported by the evidence. Nor-Cal had been successful in obtaining bids, but Mr. Pettit and Nor-Cal Superintendent Dave Adams stopped bidding new work in December 1986. Dave Adams transferred to North Bay in January 1987.
The issue of whether an alter ego relationship exists is particularly fact-intensive, and frequently summary judgment is inappropriate. See Sheet Metal Workers International Assoc. v. Arizona Mechanical & Stainless, Inc. 863 F.2d 647, 652 n. 5 (9th Cir. 1988). In this instance, however, plaintiffs' evidence, including defendants' admissions, documentary evidence, and the testimony of disinterested percipient witnesses, is overwhelming. Defendant's are unable to contradict plaintiffs' evidence by reliable documentary or disinterested third-party evidence.
The only evidence supporting defendants' position are the denials by Mr. Pettit of ownership and management of North Bay. These statements are contradicted by numerous previous statements by Mr. Pettit that he did own and manage it, including those contained in North Bay's contractors' license applications made under penalty of perjury. The Ninth Circuit has stated,
The very object of summary judgment is to separate real and genuine issues from those that are formal or pretended, so that only the former may subject the moving party to the burden of trial. Here we are convinced that the issues of fact created by [the non-moving party] are not issues which this Court could reasonably characterize as genuine; rather, they are sham issues which should not subject the defendants to the burden of a trial.
Radobenko v. Automated Equipment Corp., 520 F.2d 540, 543-44 (9th Cir. 1975). Defendants' denials do not establish a genuine issue of material fact. Accordingly, summary judgment is GRANTED in favor of plaintiffs.
PERSONAL LIABILITY OF THE PETTIT'S
Ninth Circuit decisions have considered three factors in determining whether to pierce the corporate veil: 1) a unity of interest and ownership between the corporation and the shareholder such that the two no longer exist as separate entities; 2) failure to disregard the corporation would result in injustice; and 3) fraudulent intent of the incorporators to evade civil or criminal liability. Seymour v. Hull & Moreland Engineering, 605 F.2d 1105, 1111 (9th Cir. 1979). Although plaintiff need only establish injustice or fraudulent intent in addition to disregard of the corporate identity, Board of Trustees v. Valley Cabinet & Mfg. Co., 877 F.2d 769, 773 (9th Cir. 1989), all three factors are present here.
The evidence demonstrates that the Pettits did not respect the separate corporate identities of either Nor-Cal or North Bay. The Pettits regularly paid for personal expenses out of corporate funds, including grocery and hardware store bills, improvements on personally owned real estate, vehicles and repairs, life insurance, home utility bills, real estate tax and insurance on their property, and fees for preparing their wills. The Ninth Circuit has held that such commingling of assets is "among the more serious abuses of the corporate identity." Valley Cabinet, 877 F.2d at 773. In addition, defendants' records contain references to large loans to and from the Pettits. These loans demonstrate a disregard of the corporate identity, because no promissory notes were ever executed and there is no evidence that interest was paid. Laborers Clean-up Contract Admin. Trust Fund v. Uriarte Clean-up Service, Inc., 736 F.2d 516, 524 (9th Cir. 1984)
As for fraudulent intent, as Judge Schwarzer stated in his order of May 24, 1988, defendants' conduct with respect to North Bay presents "an undisputed record of fraud, deception and obstruction." The evidence establishes that North Bay was formed for the purpose of defrauding the union and the trust funds. Frank Hodel and Robert Dandor have testified that concealment of the two companies' relationship occurred on a daily basis. For example, Mr. Pettit frequently told North Bay plumbers that "you didn't see me here," and stated to Lewis Homes Superintendent Donald Burton that he had to "be careful to conceal his involvement with North Bay so that he would not get caught at doublebreasting." Defendants' fraudulently failed to report the work hours of their non-union plumbers. Post-incorporation use of the corporate form to perpetrate fraud satisfies the fraudulent intent element, especially where employee protection is at issue. Valley Cabinet, 877 F.2d at 773-74.
Moreover, it would be unjust to recognize the corporate entities, which would allow the Pettits to retain the financial rewards of their fraudulent scheme and would prevent plaintiffs' recovery.
The doctrine of piercing the corporate veil "is designed to prevent a person from doing injury and then escaping responsibility by hiding behind a corporate shield." Plumbers & Fitters v. Matt J. Zaich Constr. Co., 418 F.2d 1054, 58 (9th Cir. 1969).
Since the Pettits are personally liable under the corporate veil-piercing doctrine, the court does not reach the issue of whether the Pettits should be held personally liable as participating tortfeasors or under section 301 of the LMRA, 29 U.S.C. § 185.
The Ninth Circuit has held that an award of punitive damages under Section 502(g)(2)(E) of ERISA is warranted where the employers' refusal to make promised contributions was "willful, wanton and malicious." Winterrowd v. David Freedman & Co., 724 F.2d 823, 826 (9th Cir. 1984) (citations omitted); see also Cox v. Eichler, 765 F. Supp. 601 (N.D. Cal. 1990); Kuntz v. Reese, 760 F.2d 926 (9th Cir. 1985), withdrawn and vacated on other grounds, 785 F.2d 1410 (1986). "Once the factual predicate for aggravated conduct is established, the imposition of punitive damages is discretionary with the trier of fact." Winterrowd, 724 F.2d at 826. Plaintiffs have established that defendants' refusal to make contributions were not only wilful, wanton and malicious, but also fraudulent. The court finds that a punitive damages award in the $ 2,000,000.00, approximately equal to plaintiffs' compensatory damages, is appropriate.
ATTORNEYS' FEE AND COSTS
As prevailing parties, the plaintiffs are entitled to a mandatory award of attorneys' fees to the plaintiff trust funds under section 502(g)(2)(D) of ERISA. 29 U.S.C. § 1132(g)(2)(D).
For the foregoing reasons, summary judgment its hereby granted in favor of plaintiff Trust Funds and against all defendants as to Counts II, III and IV. Defendants' motion for partial summary judgment is denied in its entirety. Defendants are directed to pay damages to plaintiff Trust Funds in the amount of $ 2,551,244.28 for fringe benefit contributions, liquidated damages, interest, and attorneys' fees and litigation expenses, plus an additional $ 2,000,000 in punitive damages.
IT IS SO ORDERED.
Barbara A. Caulfield
United States District Judge
JUDGMENT - April 22, 1992, Filed; April 23, 1992, Entered
Pursuant to an order granting the plaintiff's motion for partial summary judgment, it is;
ORDERED and ADJUDGED that the plaintiffs shall have judgment against defendants in the amount of $ 2,551,244.28 plus punitive damages in the amount of $ 2,000,000.
Barbara A. Caulfield
United States District Judge