Appeal from the United States District Court for the Northern District of California Bernard Zimmerman, Magistrate Judge, Presiding D.C. No. 3:08-cv-05561-BZ
The opinion of the court was delivered by: Rymer, Circuit Judge:
Argued and Submitted November 5, 2010-San Francisco, California
Before: Arthur L. Alarcon and Pamela Ann Rymer, Circuit Judges, and Matthew F. Kennelly, District Judge.*fn1
This appeal involves a "double-breasted" operation where a non-union employer, Simas Floor Co., Inc., set up a union employer, M&M Installation, Inc. to handle union flooring work. The question is whether the non-union company, Simas Floor, is liable for withdrawal liability incurred by the union company, M&M Installation, pursuant to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., as amended by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. §§ 1381-1453. We conclude that assuming it is possible to be responsi- ble on an alter ego theory, the non-union company may be liable when there is commonality between the union and non-union firms and an abuse of the double-breasted structure to avoid payment of withdrawal liability. As the district court applied a different standard that focused on whether Simas Floor's actions undermined the purposes of ERISA and MPPAA, Resilient Floor Covering Pension Fund v. M & M Installation, Inc., 651 F. Supp. 2d 1057 (N.D. Cal. 2009), we reverse and remand. The district court also rejected the Pension Fund's claim that it could accelerate the withdrawal payments. The Fund cross-appeals, and we affirm.
Simas Floor is a non-union residential and commercial flooring contractor with offices in Sacramento, Stockton, and Visalia. It is owned in equal shares by three cousins, Mark Simas, Michelle Simas Carli, and Craig Simas. Mark Simas is the president; the other two are vice-presidents. The cousins are directors along with their fathers, Ken, Jack, and Dave Simas.
M&M was formed June 1, 1994 by Mark Simas as a residential flooring and tile contractor. It was created to serve as a union signatory flooring contractor to allow non-union Simas Floor to bid on union jobs by subcontracting the work to M&M. Mark Simas is M&M's controlling shareholder and president, and a director along with Jack, Ken, and Dave Simas who each own 15% of the shares. Megan Hui was Simas Floor's chief financial officer and performed similar functions for M&M, as did Michele Carli in human resources. M&M operated out of Simas Floor's Sacramento facility, and entered into collective bargaining agreements for its flooring installers with Carpet, Resilient Flooring and Sign Workers Local Union No. 1237. These agreements required M&M to make contributions to the Resilient Floor Covering Pension Fund on behalf of M&M's flooring installers. By the time its collective bargaining agreement came up for renewal in mid- 2004, Painters District Council No. 16 had assumed control of Local 1237. The District Council insisted that the new agreement also cover Simas Floor's Sacramento flooring installers, which was not acceptable to M&M. An impasse and strike ensued, followed by a letter to Local 1237 dated July 8, 2004 from Mark Simas that repudiated the agreement for flooring installers. (This did not affect M&M's tile work or tile installers who were covered by a different collective bargaining agreement.) M&M then stopped making contributions to the Pension Fund, which prompted the Pension Fund to assess a $2,414,228.00 withdrawal liability, with quarterly payments of $43,945.20 due every March, June, September, and December for twenty years. M&M made quarterly payments from December 2004 through April 30, 2008, when it shut down operations and went out of business.
In a letter of August 19, 2008 the Pension Fund notified M&M that its June 2008 payment was delinquent and demanded payment. It explained that in its view, M&M was "still doing business under the name of either M&M Installations or Simas Floor Company" and continued to be liable for withdrawal liability. Ultimately, Simas Floor made the payments under protest. This suit, in which the Pension Fund seeks to collect the withdrawal liability from M&M and Simas Floor, and to accelerate payment, followed.
The parties filed cross-motions for summary judgment. The Pension Fund moved for judgment on the grounds that Simas Floor and M&M were alter ego employers; that M&M wound up its business with a principal purpose of avoiding its withdrawal liability in violation of § 1392(c); and that Simas Floor is the successor employer to M&M. Simas Floor sought judgment on the footing that it was not an "employer" within the meaning of MPPAA as it is not the alter ego or successor of M&M. In a published decision, the district court granted summary judgment to the Pension Fund, holding that Simas Floor was M&M's alter ego because the two companies admittedly had sufficient commonality and because recognizing the sepa- rateness of the two would undermine the purposes of ERISA and MPPAA to protect employee rights. Resilient Floor Covering Pension Fund v. M & M Installation, Inc., 651 F. Supp. 2d 1057 (N.D. Cal. ...