United States District Court, N.D. California
OPERATING ENGINEERS HEALTH AND WELFARE TRUST FUND FOR NORTHERN CALIFORNIA, et al., Plaintiffs,
JS TAYLOR CONSTRUCTION, INC., A CALIFORNIA CORPORATION, et al.,
ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY
JUDGMENT, PARTIALLY GRANTING PLAINTIFFS' MOTION FOR
SUMMARY JUDGMENT, AND ORDERING DEFENDANTS TO SHOW CAUSE WHY
SUMMARY JUDGMENT AS TO THE SECOND AUDIT SHOULD NOT ISSUE
DOCKET NOS. 47, 56
EDWARD M. CHEN, UNITED STATES DISTRICT
are multiemployer benefits plans and their respective
trustees, who have filed suit against JS Taylor Construction,
Inc. (a corporation) and Joshua Thiel (a principal
shareholder). The suit alleges a breach of the parties'
collective bargaining agreement, and Plaintiffs seek unpaid
contributions, interest, liquidated damages, and other
relief. Defendants filed a Motion for Summary Judgment,
arguing that Mr. Thiel cannot be held personally liable for
the obligations of JS Taylor. Plaintiffs filed a Cross Motion
for Summary Judgment, seeking an order from the Court
directing Defendants to pay the outstanding benefit
contributions, interest, and liquidated damages, as well as
attorneys' fees and costs.
action arises under the Employee Retirement Income Security
Act of 1974 (‘ERISA') and out of an alleged breach
of a collective bargaining agreement (‘CBA') for
unpaid contributions.” Defendant's Motion for
Summary Judgment (“Mot.”) at 1, Docket No. 47.
“Plaintiffs are multiemployer employee benefit plans
and their respective trustees” (collectively
“Plaintiffs”). Opposition and Cross Motion for
Summary Judgment (“Opposition”) at 2, Docket No.
56. Defendants are JS Taylor Construction, Inc., a California
corporation, and Joshua Thiel, an individual. Complaint at 1,
Docket No. 1. Mr. Thiel was the sole proprietor of JW Taylor
(a sole proprietorship) and is now a principal shareholder of
JS Taylor Construction (a corporation). Opposition at 10-11.
2014, Defendant Thiel entered into the Independent Northern
California Construction Agreement (“Independent
Agreement”) with the Union on behalf of JW Taylor
Construction. Opposition at 2 (citing Declaration of Nate
Tucker (“Tucker Decl.”) ¶ 2, Docket No. 60;
Declaration of Dan Reding (“Reding Decl.”) ¶
2, Docket No. 58). That Agreement “incorporates the
Master [Bargaining] Agreement” between the Union and
several contractor groups. Complaint at 3. The Master
Bargaining Agreement in turn incorporates the Trust
Agreements, under which Defendants were “required to
pay certain contributions to: the Operating Engineers'
Vacation and Holiday Pay Plan; Contract Administration Fund;
Job Placement Center and Market Area Committee Administration
Market Preservation Fund; Industry Stabilization Fund; and
Business Development Trust Fund.” Id. at 4.
The Agreement also “require[d] Defendants to pay . . .
contributions to . . . the Union for union dues, . . . plus
liquidated damages and interest on late-paid fringe benefit
contributions, plus attorneys' fees and costs.”
Opposition at 1. The debts allegedly owed were incurred only
by JS Taylor, the corporate entity that JW later became.
time he entered into the Independent Agreement (July 2014),
Mr. Thiel “advised the Union that he would be
incorporating his business and would notify the Union once he
had incorporated.” Opposition at 2 (citing Tucker
Decl., ¶ 3). In December 2014, “JW Taylor
Construction stopped doing business.” Mot. at 3 (citing
Haefele Declaration (“Haefele Decl.”), Exh. G
(“Thiel Depo.”) at 53:10-25; 54:1-9, Docket No.
69). The following month, JS Taylor “started doing
business” and Mr. Thiel informed the union that JS
Taylor “was taking over for JW Taylor
Construction.” Id. Defendants state that, upon
receiving this information from Mr. Thiel, the Union
“simply changed the employer name in their system . . .
and began accepting monthly contribution payments from [JS
Taylor]” rather than having Mr. Thiel “re-sign
the Independent Agreement on behalf of [JS Taylor].”
this transition, neither JS Taylor nor JW Taylor was
purchased by or merged with the other entity. Defendant's
Reply in Support of Motion for Summary Judgment
(“Reply”) at 3, Docket No. 67. JS Taylor was
never paid to complete work that JW Taylor was hired to
perform. Thiel Depo. at 35. Nor did JS Taylor buy or acquire
equipment or tools from JW Taylor. Id. at 30-32.
However: (1) Mr. Thiel put the Union on “early notice
that Mr. Thiel was going to be incorporating, ” Reply
at 6; (2) he also stated in his deposition that “when
JW ceased to exist, JS --JS took over, ” Thiel Depo. at
23; (3) Mr. Thiel also testified that employees were
“transferred” from JW Taylor to JS Taylor,
id. at 58; (4) Mr. Thiel believes that JS Taylor is
obligated to make trust fund contributions because of the
bargaining agreement [which had been signed previously only
on behalf of JW Taylor], see Id. at 37; (5)
ownership of the entities was largely identical: Mr. Thiel
went from sole proprietor of JW Taylor to principal
shareholder of JS Taylor, see Id. at 27; and (6) the
addresses of the two entities were the same, namely Mr.
Thiel's home address, see Id. at 54.
assert that “by early 2017, Defendants had become
delinquent in their contribution payments.” Mot. at 3-4
(citing Haefele Decl., Ex. I, Plaintiffs' Response to
Defendant's Interrogatories, Set One (“PRDI”)
at 7-8, Docket No. 69). Specifically, Plaintiffs allege
unpaid contributions now at issue were owed by JS Taylor for
“February through April, and July through November
2016; and January 2017.” Complaint at 5. Plaintiffs
assert one cause of action against Defendants, Mot. at 2,
contending that Defendants have “breached the
Bargaining and Trust Agreements and are in violation of ERISA
§ 515, 29 U.S.C. § 1145, and [the Labor Management
Relations Act (“LMRA”)] § 301(a), ”
Complaint at 5.
seek “any unpaid contributions, due at time of
Judgment, ” “liquidated damages on all late-paid
and unpaid contributions, ” “interest on all
late-paid and unpaid contributions, ” and
“reasonable attorneys' fees and costs of this
action, including any audit fees.” Complaint at 6-7.
Defendants, on the other hand, argue that Mr. Thiel has no
liability for JS Taylor's unpaid contributions or any
related payments because he only signed the Independent
Agreement on behalf of JW Taylor, a sole proprietorship,
which ceased doing business in 2014. Mot. at 4. Because Mr.
Thiel never signed a new Agreement with the Union after JS
Taylor incorporated and began doing business, he argues that
he is not personally liable for the unpaid contributions owed
by JS Taylor. Id.
contend that Mr. Thiel “personally guaranteed all
amounts” owed, i.e., the contributions and
other moneys which accrued against JS Taylor, pursuant to the
Independent Agreement. Complaint at 4; Mot. at 2. They rely
on Paragraph 12 of the Independent Agreement, which states:
If the Individual Employer is a corporation, its principal
shareholder(s) or if the individual Employer is a
partnership, its general partners personally guarantee all
payment of wages and fringe benefits, including fringe
benefit contributions, liquidated damages, interest and
collection costs, including, but not limited to,
attorney's fees and auditor/accountant fees.
Decl., Exh. A at 1, Docket No. 60-1. However, Mr. Thiel
disputes the imposition of personal liability because JW
Taylor was never a corporation or a partnership, and
Paragraph 12 does not impose individual liability on sole
proprietors. Mot. at 6-8. In addition, Mr. Thiel never signed
a subsequent agreement subjecting himself to personal
liability for JS Taylor's corporate obligations.
Id. at 4.
Motion for Summary Judgment
Rule of Civil Procedure 56 provides that summary judgment
shall be rendered on a claim or defense, or part of a claim
or defense, “if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). A fact is material if it could affect the outcome of
the suit under the governing law. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248-49 (1986). A dispute is
genuine “if the evidence is such that a reasonable jury
could return a verdict” for either party. Id.
“The mere existence of a scintilla of evidence . . .
will be insufficient; there must be evidence on which the
jury could reasonably find for the [non-moving party].”
Id. at 252. On a summary judgment motion, a court
must view the evidence in the light most favorable to the
non-moving party, drawing all justifiable inferences in that
party's favor. Id. at 255.
party moving for summary judgment always bears the initial
burden of demonstrating the absence of a genuine issue of
material fact. Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). When the movant also bears the ultimate
burden of proof at trial, it can meet this initial burden of
production by “com[ing] forward with evidence which
would entitle it to a directed verdict if the evidence went
uncontroverted at trial.” C.A.R. Transp. Brokerage
Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir.
2000). This requires the movant to affirmatively demonstrate
that there is no genuine dispute as to every essential
element of its claim. See River City Mkts., Inc. v.
Fleming Foods W., Inc., 960 F.2d 1458, 1462 (9th Cir.
1992). In contrast, where the movant does not bear the
ultimate burden of proof, it can meet its initial burden by
demonstrating the non-moving party's failure “to
make a showing sufficient to establish the existence of an
element essential to [the non-moving party's]
case.” Celotex, 477 U.S. at 322. Once the
movant meets its initial burden of production, the burden
shifts to the non-moving party to “produce evidence to
support its claim or defense.” Nissan Fire &
Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d
1099, 1103 (9th Cir. 2000). “If the nonmoving party
fails to produce enough evidence to create a genuine issue of
material fact, the moving party wins the motion for summary
judgment.” Id. (citing Celotex, 477
U.S. at 322). Conversely, if the nonmoving party
“produces enough evidence to create a genuine issue of
material fact, the nonmoving party defeats the motion.”
resolving a summary judgment motion, the court
“rel[ies] on the nonmoving party to identify with
reasonable particularity the evidence that precludes summary
judgment”; it is not the court's task “to
scour the record in search of a genuine issue of triable
fact.” Keenan v. Allan, 91 F.3d 1275, 1279
(9th Cir. 1996) (citation omitted).
Court applies federal common law when deciding cases under
ERISA. See, e.g., Menhorn v. Firestone Tire
& Rubber Co., 738 F.2d 1496, 1500 (9th Cir. 1984)
(“The courts are directed to formulate a nationally
uniform federal common law to supplement the explicit
provisions and general policies set out in ERISA, referring
to and guided by principles of state law when appropriate,
but governed by the federal policies at issue.”);
see also Hamner v. Unum Life Ins. Co. of Am., No. C
96-1973 TEH, 1997 WL 257515, at *4 (N.D. Cal. May 6, 1997)
(recognizing “uniform federal common law informing
interpretation of ERISA governed insurance contracts”
(internal quotation marks omitted) (citing Saltarelli v.
Bob Baker Group Medical Trust, 35 F.3d 382, 386 (9th
Cir.1994))). “Interpretation of a contract is a matter
of law, including whether [a] contract is ambiguous.”
United States v. King Features Entm't, Inc., 843
F.2d 394, 398 (9th Cir. 1988); see also Brobeck, Phleger
& Harrison v. Telex Corp., 602 F.2d 866, 871 (9th
Cir. 1979) (“the determination of whether a written
contract is ambiguous is a question of law that must be
decided by the court”).
seeking “to ascertain the meaning of [an ambiguous]
collective bargaining agreement” must “first
examine its express written terms.” Nw.
Administrators, Inc. v. B.V. & B.R., Inc., 813 F.2d
223, 225 (9th Cir. 1987). When that language is unclear,
“the court must determine the ‘parties'
actual intent' at the time of the agreement's
execution.” Id.at 226. “When a plan is
ambiguous a court may, and usually does, consider extrinsic
evidence to interpret it.” Hamner v. Unum Life Ins.
Co. of Am., No. C 96-1973 TEH, 1997 WL 257515, at *4
(N.D. Cal. May 6, 1997). The Ninth Circuit has explained:
“If we find a contract to be ambiguous, we ordinarily
are hesitant to grant summary judgment because differing
views of the intent of parties will raise genuine issues of
material fact. This circuit has not, however, adopted a rigid
rule prohibiting reference to extrinsic evidence in resolving
a contractual ambiguity on a summary judgment motion.”
San Diego Gas & Elec. Co. v. Canadian Hunter Mktg.
Ltd., 132 F.3d 1303, 1307 (9th Cir. 1997). Where the
parties' “actual intent raises issues of material
fact” even after reference to extrinsic evidence,
summary judgment is improper. Nw. Administrators at
226. However, as San Diego Gas & Electric
instructs, in the absence of ambiguity which persists after
considering the extrinsic evidence, summary judgment may be
Mr. Thiel's Personality Liability for JS Taylor's
first key issue is whether Mr. Thiel can be held personally
liable for the obligations of JS Taylor, the corporation.
Normally, when a sole proprietorship incorporates and
“cease[s] to be the employer, ” the corporation
alone becomes “responsible for the unpaid contributions
after it became the employer.” Operating Engineers
Pension Tr. v. Reed, 726 F.2d 513, 515 (9th Cir. 1984).
Here, JW Taylor-the sole proprietorship-stopped doing
business in December 2014. Thiel Depo. at 53, 54. It also
ceased having employees at that time. Id. at
53-54. JS Taylor- the corporation-began
performing work the following month in January of 2015.
Id. at 25. JS Taylor did not take over any projects
from JW Taylor. Around the time JS Taylor began performing
work, Mr. Thiel notified the Union that his business had been
incorporated and was changing its name to JS Taylor
Construction. Id. at 57. Thus, it would appear at
first blush that Mr. Thiel-in his role as sole proprietor of
JW Taylor-bears no responsibility for the unpaid
contributions of JS Taylor.
the Ninth Circuit has recognized that “special
circumstances” (such as a contract that modifies the
normal rules) may sometimes compel a different outcome.
Reed, 726 F.2d at 515. Here, the parties disagree as
to the effect of the Independent Agreement. The parties focus
on the text of Paragraph 10 of the Independent Agreement.
That paragraph provides:
If the Individual Employer sells or transfers any or all of
its assets, stock, and/or operations, it will provide as a
term of the sale or transfer that the buyer or transferee
shall recognize the Union as the ...