Laborers Pension Trust Fund-Detroit & Vicinity v. Interior Exterior Specialists Construction Group, Inc. , 394 F. App'x 285 ( 2010 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 10a0595n.06
No. 08-2526
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
LABORERS PENSION TRUST FUND - DETROIT AND ) FILED
VICINITY, LABORERS VACATION AND HOLIDAY ) Sep 08, 2010
TRUST FUND - DETROIT AND VICINITY, ) LEONARD GREEN, Clerk
LABORERS METROPOLITAN DETROIT HEALTH )
AND WELFARE FUND, LABORERS ANNUITY FUND )
- DETROIT AND VICINITY, and MICHIGAN )
LABORERS’ TRAINING FUND, )
) On Appeal from the United
Plaintiffs-Appellees, ) States District Court for the
) Eastern District of Michigan
v. )
)
INTERIOR EXTERIOR SPECIALISTS )
CONSTRUCTION GROUP, INC., et al., )
)
Defendants, )
)
and )
)
INTERIOR EXTERIOR SPECIALISTS COMPANY; )
THE LLAMAS GROUP CORPORATION, )
)
Defendants-Appellants. )
)
Before: BOGGS and COOK, Circuit Judges; and COLLIER, Chief District Judge.*
PER CURIAM. This is an action under the Employee Retirement and Income Security Act
of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461, and the Labor Management Relations Act of 1947
(“LMRA”), 29 U.S.C. §§ 141-187, seeking damages for alleged violations of a collective bargaining
*
The Honorable Curtis L. Collier, Chief United States District Judge for the Eastern District
of Tennessee, sitting by designation.
No. 08-2526
Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
agreement (“CBA”) between Local Union 334 of the Laborers International Union of North
America, AFL-CIO (“Local 334”) and defendant Interior Exterior Specialists Co. (“IES”). Plaintiff
fringe-benefit trust funds (the “Funds”) brought suit as third-party beneficiaries to the CBA to collect
allegedly unpaid fringe-benefit contributions and liquidated damages.1
The district court held: (1) that IES had not properly withdrawn from the CBA in 2003, and
therefore remained bound by the CBA until 2006; (2) that defendant The Llamas Group Corp.
(“TLG”) was the alter ego of IES; (3) that IES/TLG owed the Funds $167,501.34 in unpaid fringe-
benefit contributions and $33,500.29 in liquidated damages for the years 2000-2006; and (4) that
IES/TLG were not entitled to reimbursement or an offset for alleged overpayments to the Funds. We
hold that the district court erred in its conclusion that IES remained bound by the CBA during the
2003-2006 time period, but otherwise find no error in its conclusions. Accordingly, we affirm in
part, reverse in part, and remand.
BACKGROUND
On July 28, 1997, Rito Julian Llamas (“Rito”) formed IES, a subcontractor performing
selective demolition and special coatings. Rito is the sole shareholder and officer of IES. On March
30, 1999, Julie Llamas (“Julie”), Rito’s wife, formed TLG, a general contractor that also does some
demolition and painting. Julie is the sole shareholder of TLG. As a general contractor, TLG
occasionally subcontracts work to IES, although TLG and IES do not execute written contracts in
1
The Funds are administered for the benefit of employees represented by Locals 334, 1076,
and 1191 of the Laborers International Union of North America, AFL-CIO. This case, however,
involves only fringe-benefit contributions allegedly owed on behalf of Local 334 workers.
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
connection with these jobs, as TLG and its other subcontractors do. Both companies are located in
the same building, which is jointly owned by Rito and Julie. IES pays all the bills for the building
and assesses an annual management fee against TLG.
On April 6, 2000, IES signed a CBA with Local 334. The opt-in agreement governing the
relationship between IES and Local 334 contained a so-called “evergreen provision” concerning the
periodic renewal of the CBA. The relevant section provided:
[IES] agrees that, unless the Union is notified to the contrary by [IES] by registered
mail at least sixty (60) days prior to the expiration date of this Agreement or any
subsequent Agreement, [IES] will be bound by and adopt any Agreement reached by
the Union and the [multi-employer bargaining unit] during negotiations which follow
notice by the Union [as provided in a previous paragraph].
The CBA’s term was to expire on May 31, 2003.
On March 3, 2003, as the end of the term approached, IES executed a power of attorney in
favor of Forrest Henry (“Henry”), the Director of Labor Relations for the Construction Association
of Michigan, a multi-employer bargaining unit. The power of attorney authorized Henry to bind IES
to the successor CBA which the multi-employer unit was negotiating with Local 334. However, on
March 28, 2003 (i.e., 64 days prior to the CBA’s expiration date), Rito sent a letter by registered mail
to Scott Covington (“Covington”), the business manager of Local 334, stating: “Please be advised
that if the contract is not negotiated to our satisfaction before the expiration date of the 2000 to 2003
contract, we will not be renewing our contract with Local 334.” That same day, Rito sent another
letter to Covington, stating: “Please be advised that [IES] is hereby giving notice, in accordance with
Article XXXIII, ‘Changes’, of the 2000-2003 [CBA], of its desire to negotiate changes in the
Agreement. I will contact you in the near future to schedule a meeting for this purpose.”
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
Thereafter, Local 334 refused to negotiate individually with IES. The sixty-day deadline
referred to in the CBA expired on April 1. On May 20, 2003, Rito sent another letter to Covington,
stating: “In light of your refusal and total disregard to contract negotiations [sic], be advised that IES
still intends to terminate its contract with Local 334 according to [IES’s] letter . . . dated March 28,
2003. As of June 1, 2003[,] [IES] ha[s] no further contractual obligations to Local 334.”
On June 1, 2003, acting in his capacity as representative of the Construction Association of
Michigan, Henry executed a new CBA with Local 334 for the 2003-2006 time frame on behalf of
multiple employers who had delegated to him the authority to do so. At that time, Henry was under
the impression that he no longer “retained any authority or assent to enter into [a new CBA] on
behalf of IES,” owing to Rito’s March 28, 2003 letters. After the 2003-2006 CBA was executed,
Rito received calls from Covington and the Funds’ collection administrator inquiring whether IES
would enter into a new CBA with Local 334. Furthermore, after the new CBA was executed, Local
334’s business agent insisted that IES sign one-time Project Labor Agreements for specific IES
projects; such agreements are not necessary where an employer is covered by a CBA.
On January 4, 2004, the Funds requested an audit of IES, TLG, and several other companies
to determine the amount of money owed to the Funds under the CBA’s fringe-benefit-contribution
provisions. IES and TLG declined, asserting that IES was no longer a party to the CBA and that
TLG had never been a party to the CBA. The Funds filed this lawsuit on November 18, 2004,
seeking, among other things, a court order directing the defendants to submit to an audit.2 On March
2
The other companies whom the Funds sought to audit were also originally named as
defendants, but were dismissed before trial and are not involved in this appeal. We use the word
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
11, 2005, the district court ordered IES and TLG to submit all records and documents to the Funds
for an audit, which was completed and released on May 19, 2005. On March 24, 2006, Rito sent
a letter to Covington, stating that IES continued to believe that it was not bound by the 2003-2006
CBA, and that, in any event, IES would “not be renewing [the alleged] contract with Local 334 upon
expiration of the contract term on May 31, 2006.”3
The parties filed cross-motions for summary judgment on the issues of when IES’s
obligations under the CBA had terminated and whether TLG was bound by the CBA as IES’s alter
ego. The district court determined that IES had not properly terminated its obligations before the
expiration of the 2000-2003 term, and was thus bound as a matter of law through the end of the
2003-2006 term. As to TLG’s alter-ego liability, the district court found that a factual dispute
precluded summary judgment. Both sides filed motions for reconsideration, which were denied.
A bench trial was held on the Funds’ alter-ego claim and on IES’s counterclaim for a refund
or offset of $67,828.71 it alleged it had overpaid to the Funds. At the close of the Funds’ case-in-
chief, the defendants moved for judgment as a matter of law that TLG was not IES’s alter ego. The
district court determined, based on the testimony and evidence presented by the Funds, that the
companies appeared to share management, employees, and equipment; consequently, it denied the
motion.4
“defendants” in this opinion to refer only to IES and TLG.
3
There is no dispute that IES’s obligations under the CBA did not continue past that date.
4
For example, in addition to the facts noted previously, two IES employees testified that
they had received checks from both IES and TLG when working on the same project and that they
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No. 08-2526
Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
Following trial, the district court issued an opinion holding that TLG was the alter ego of IES
and that IES had used TLG to avoid its fringe-benefit-payment obligations under the CBA. The
district court also held that IES was not entitled to a refund or a credit for any overpayments it
claimed to have made to the Funds. The district court entered judgment in favor of the Funds in the
amount of $167,501.34 in unpaid fringe-benefit contributions (for both IES and TLG jobs) and
$33,500.29 in liquidated damages. Defendants timely appealed.
STANDARDS OF REVIEW
Although defendants appeal several orders of the district court, this appeal raises only three
issues of law: when IES’s obligations under the CBA were terminated, whether TLG was an alter
ego of IES, and whether IES is entitled to reimbursement for alleged overpayments.
The contract-termination issue was decided on summary judgment. An order granting
summary judgment is reviewed de novo. Tysinger v. Police Dep’t of City of Zanesville, 463 F.3d
569, 572 (6th Cir. 2006). Summary judgment should be granted where “the pleadings, the discovery
and disclosure materials on file, and any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c).
We view the evidence in the light most favorable to the non-movant and make all reasonable
inferences in the non-movant’s favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574 (1986); Nat’l Satellite Sports, Inc. v. Eliadis Inc., 253 F.3d 900, 907 (6th Cir. 2001).
had used the same vehicles and equipment for both IES and TLG jobs.
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
The alter-ego issue was addressed in the district court’s denial of defendants’ motion for
judgment as a matter of law, and again in the district court’s post-trial opinion. An order on a motion
for judgment as a matter of law should be granted where “a party has been fully heard with respect
to an issue and there is no legally sufficient evidentiary basis for a reasonable jury to have found for
that party with respect to that issue.” McCombs v. Meijer, Inc., 395 F.3d 346, 352-53 (6th Cir. 2005)
(quoting Fed. R. Civ. P. 50(a)(1)). We generally review a district court’s decision to deny such a
motion de novo, id.; however, this particular order turns entirely on the determination of alter-ego
status, which “is a question of fact to be reversed only if clearly erroneous.” Yolton v. El Paso Tenn.
Pipeline Co., 435 F.3d 571, 587 (6th Cir. 2006) (citing NLRB v. Fullerton Transfer & Storage Ltd.,
910 F.2d 331, 336 (6th Cir. 1990)). “A factual finding will only be clearly erroneous when, although
there may be evidence to support it, the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed.” United States v. Adams, 583 F.3d
457, 463 (6th Cir. 2009).
The counterclaim for reimbursement, as we will address further below, involves the district
court’s denial of an equitable remedy. “We review [a] district court’s equitable determination for
abuse of discretion.” Liberty Life Assurance Co. of Boston v. Gilbert, 507 F.3d 952, 959 (6th Cir.
2007); see also Marcelli v. Walker, 313 F. App’x 839, 842 (6th Cir. 2009) (“[In] an equitable action,
our standard of review is abuse of discretion.”). Abuse of discretion occurs only when the district
court “committed a clear error of judgment, such as applying the incorrect legal standard,
misapplying the correct legal standard, or relying upon clearly erroneous findings of fact.” ACLU
v. McCreary County, Ky., 607 F.3d 439, 450 (6th Cir. 2010) (internal quotation marks omitted).
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
ANALYSIS
A. Termination of the CBA
Because Congress intended through ERISA to “give[ covered] plans the upper hand in . . .
litigation in order to permit ‘efficacious[ ]’ recovery of ‘delinquent contributions,’” Plumbers &
Pipefitters Local Union No. 572 Health & Welfare Fund v. A & H Mech. Contractors, Inc., 100 F.
App’x 396, 401 (6th Cir. 2004) (quoting 126 Cong. Rec. 23,039 (1980)), courts have limited the
defenses that employers may raise in ERISA collection actions. Id.; see also Northwestern Ohio
Adm’rs, Inc. v. Walcher & Fox, Inc., 270 F.3d 1018, 1025 (6th Cir. 2001). Some decisions have
taken this to the extreme: the Ninth Circuit, for example, held that even a party’s “purported
termination of the [CBA] is not a legitimate defense to [a] [t]rust [f]und[’s] action.” Carpenters
Health & Welfare Trust Fund v. Bla-Delco Constr., Inc., 8 F.3d 1365, 1369 (9th Cir. 1993).5
We have taken a more moderate course, holding that, while many traditional contract
defenses are unavailable in collection actions, trust funds are not entitled to “enforce a nonexistent
contractual obligation,” Plumbers & Pipefitters, 100 F. App’x at 402 (quoting Devito v. Hempstead
China Shop, Inc., 38 F.3d 651, 654 (2d Cir. 1994)), at least where it is evident upon “a cursory
review of the parties’ actions” that the contract has been terminated, id. at 403 (citing Louisiana
Bricklayers & Trowel Trades Pension Fund & Welfare Fund v. Alfred Miller Gen. Masonry
Contracting Co., 157 F.3d 404 (5th Cir. 1998)); see also id. (“As A-H’s termination defense
5
In Plumbers & Pipefitters, however, we noted that this decision has not been followed by
other circuits, and that the Ninth Circuit itself has subsequently “given the decision a narrow
reading.” 100 F. App’x at 403 (citations omitted).
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
represents a classically straightforward inquiry into whether the contract still existed, the district
court permissibly considered the defense.”). Allowing the assertion of a termination defense
“provided the inquiry is ‘superficial,’” we reasoned, “sensibly balances the competing interests in
[a fund’s] avoiding complex litigation . . . and ensuring that the employer has a legitimate contractual
obligation to make employee contributions.” Id. (quoting Louisiana Bricklayers, 157 F.3d at 409
n.12). For a termination to be effective, this limited inquiry must reveal that the employer
“unequivocally . . . communicat[ed] the intent to withdraw . . . .” Id. at 400 (quoting Sheet Metal
Workers’ Int’l v. Herre Bros. Inc., 201 F.3d 231, 244 (3d Cir. 1999)).
The question in this case is whether Rito’s actions met this standard. We have examined
whether a termination notice was sufficiently clear in two unpublished cases, holding both times that
the requisite intent was sufficiently conveyed. In Plumbers & Pipefitters, we accepted as sufficient
a timely letter stating that “A-H Mechanical Contractors, Inc., hereby withdraws its affiliation with
the [multi-employer bargaining unit] and will no longer be bound by any collective bargaining
agreement entered into by that historical bargaining group.” Id. at 401. Subsequently, in Trustees
of B.A.C. Local 32 Insurance Fund v. Norwest Tile Co., we accepted as sufficient the following
statement:
Please treat this letter as notice by Norwest Tile Company of withdrawal by it from
any employer association for purposes of collective bargaining with your union . . . .
Norwest Tile . . . will not be bound by any new agreement . . . . [R]ather Norwest
desires to negotiate a new collective bargaining agreement . . . on an individual basis.
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No. 04-2436, 2005 WL 3440431, at *4 (6th Cir. Dec. 14, 2005).6
By contrast, an example of a statement that was not sufficient to terminate appears in
Louisiana Bricklayers, a Fifth Circuit case upon which we relied in Plumbers & Pipefitters (and,
indirectly, in Norwest Tile, which relied upon Plumbers & Pipefitters). In Louisiana Bricklayers,
the employer had sent the union the following notice:
[F]or the immediate future we will continue to make monthly contributions to our
local benefit funds on behalf of those employees covered by the Local 4 collective
bargaining agreement. If there is a change in our position, we will notify you in
another letter.
157 F.3d at 406 (emphasis added). The Fifth Circuit quite sensibly held that this statement did not
“unequivocally indicate[] an intention to terminate the CBA . . . .” Id. at 409. To the contrary, the
statement affirmatively indicated that the status quo “will continue” indefinitely, unless the employer
had a change of heart.
Here, Rito’s timely March 28, 2003 letters are quite unlike the statement in Louisiana
Bricklayers. In those letters, Rito clearly indicated that, come May 31, 2003, the contract between
IES and the union “w[ould] not be renew[ed]” (emphasis added), unless the contract had been
“[re]negotiated to [IES’s] satisfaction.” While the phrasing was conditional, none of our cases
requires that an employer use the present indicative in order for its notice to pass muster.
Conditionality does not automatically equal ambiguity, at least where the condition is entirely
straightforward and its satisfaction (or not) is evident to all parties. Cf. Smith v. Endell, 860 F.2d
6The employer in Norwest Tile “did not subsequently participate [on an individual basis]
in any negotiations for the new agreement.” 2005 WL 3440431, at *4.
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1528, 1531 (9th Cir. 1988) (“Smith’s initial request for counsel was not equivocal or ambiguous. It
was conditional, but the investigators knew the condition to be satisfied.”).
The district court held to the contrary, stating that a reviewing court may not look beyond the
four corners of “the [termination] documents themselves” to see whether a termination was effected.
Because Rito’s March 28 letters themselves merely conveyed the conditional possibility of
termination, the district court considered that the end of the story; it believed that the parties’ course
of conduct after March 28, 2003 was “parol evidence” outside the scope of review in an ERISA
action. See RE #130 at 13. In other words, the district court believed it was obligated to remain
willfully blind to the undisputed facts that Local 334 did refuse to negotiate with IES following
Rito’s letters, that IES’s demands for changes to the CBA were consequently not met, and that the
condition for termination clearly specified in Rito’s March 28 letters did come to pass.
However, we have never adopted a four-corners-of-the-document rule in cases of this sort.
In fact, in Plumbers & Pipefitters, while acknowledging that a court’s inquiry in a termination case
must be “superficial,” we stated that courts may conduct a “cursory review of the parties’ actions,”
without purporting to limit the examination, as a rule, to the written termination notice itself. 100
F. App’x at 403 (emphasis added). Similarly, in the more dated case of Chattanooga Mailers Union,
Local No. 92 v. Chattanooga News-Free Press Co., we stated that “[a] notice to terminate [a CBA]
must be clear and explicit,” but then immediately went on to say that “[b]oth the language of the
[CBA] and the parties’ intent, as manifested by past practice, are relevant in determining whether
the contract remained operative . . . .” 524 F. 2d 1305, 1312 (6th Cir. 1975) (emphasis added).
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
Admittedly, this circuit did hold in one ERISA collection action that funds are “entitled to
rely solely on the printed terms” of their agreements with employers. Walcher & Fox, 270 F.3d at
1025. In Walcher & Fox, the question before us was whether “cryptic” and disputed handwritten
notations on an otherwise unambiguous typed agreement could effect a modification of that
agreement. Id. at 1024. We held that whatever those scribbles arguably disclosed about the parties’
intent was simply irrelevant, as the printed agreement necessarily controlled. Id. at 1025. But we
find that case readily distinguishable from this one. First of all, mid-term modification of a CBA is
not one of the few defenses that courts have permitted employers to raise in ERISA collection
actions. See id. at 1025; Plumbers & Pipefitters, 100 F. App’x at 402-03. Because Walcher & Fox
turned on the nonexistence of a modification defense, it does not speak to the issue of what evidence
may be considered in a case involving the recognized defense of CBA termination.
We also acknowledge that in Louisiana Bricklayers, which did involve a termination defense,
the Fifth Circuit used language that might appear to suggest that resort to parol evidence is
impermissible. In that case, as we have already noted, the employer sent an entirely open-ended
letter stating that it did intend to continue abiding by the CBA for the time being. The Fifth Circuit
noted that “on the face of the document[], whatever the letter did, it neither unequivocally indicated
an intention to terminate the CBA, nor could it do so.” 157 F.3d at 409 (emphasis added). However,
first of all, the Louisiana Bricklayers opinion cited no case law holding that the reviewing court is
in fact limited to considering the “face of the document[]”; the case it actually cited following its
“face of the document” statement held merely that “[n]otice to terminate must be clear and explicit.”
Id. (quoting Office & Prof’l Employees Int’l Union, Local 42, AFL-CIO v. United Auto., Aerospace
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
& Ag. Implement Workers of Am., Westside Local No. 174, UAW, 524 F.2d 1316, 1317 (6th
Cir.1975)). Further, the ostensible “termination” notice in Louisiana Bricklayers was also untimely,
such that the “face of the document[]” language was arguably dictum. Id.We therefore believe that, when a termination defense is at issue in an ERISA collection
action, there is no categorical bar to the consideration of the parties’ conduct following a timely
attempt to terminate – at least where there is no genuine dispute of material fact regarding the
parties’ actions. Consequently, we hold that where an employer sends a timely, unambiguously
phrased conditional notice of termination, and where the condition triggering the termination is
undisputedly satisfied before a new CBA goes into effect, the employer is not bound by the new
CBA.7 The rationale for limiting contract defenses in ERISA collection actions, after all, is to
prevent the “transform[ation of] run-of-the-mill collection efforts by plan trustees into expensive and
complex litigation relating to the employer-union relationship.” Plumbers & Pipefitters, 100 F.
App’x at 402. Recognizing a conditional termination of this sort, where the relevant facts are not
reasonably in dispute, creates little or no more expense or complexity than recognizing a termination
defense bounded by the four corners of the notice-giving document. The district court’s approach,
we believe, does not “sensibly balance[] the competing interests” involved. Id. at 403.
7
There is no dispute here that the triggering condition occurred. The record clearly
establishes that Local 334 did not negotiate with IES, as IES had demanded; that from May 20, 2003
onwards, IES consistently proclaimed that it had indeed terminated its obligations under the CBA;
and that Local 334 thereafter behaved in a manner consistent with IES’s having done so.
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We therefore hold that IES successfully terminated its CBA obligations effective June 1,
2003, and that the district court erred by granting summary judgment to the Funds and denying
summary judgment to defendants on the termination issue.8
B. Alter-Ego Status
The alter ego doctrine “is an equitable doctrine ‘developed to prevent employers from
evading obligations under the [National Labor Relations] Act merely by changing or altering their
corporate form.’” Trustees of the Detroit Carpenters Fringe Benefit Funds v. Indus. Contracting,
LLC, 581 F.3d 313, 318-19 (6th Cir. 2009) (quoting NLRB v. Allcoast Transfer, Inc., 780 F.2d 576,
579 (6th Cir. 1986)) (alteration in Detroit Carpenters). It applies to cases “where a new employer
is ‘merely a disguised continuation of the old employer,’” and where “two or more coexisting
employers performing the same work are in fact one business, separated only in form.” Fullerton,
910 F.2d at 336 (quoting S. Petroleum Co. v. NLRB, 315 U.S. 100, 106 (1942)). The test is “whether
the two enterprises have substantially identical management, business, purpose, operation,
equipment, customers, supervision and ownership.” Id. (quoting Nelson Electric v. NLRB, 638 F.2d
965, 968 (6th Cir. 1981)) (internal quotation marks omitted). The alter-ego analysis is flexible and
involves a “weighing of all relevant factors.” Allcoast, 780 F.2d at 581.
8
In its brief, defendants assert that this conclusion frees them of any financial liability to the
Funds whatsoever, “as any allegedly improper conduct occurred after May 31, 2003.” Appellant Br.
at 20. However, we cannot readily determine from the record on appeal that this is so. For example,
there are suggestions in the record that IES and TLG intermingled their workforces prior to this date
(and, as we determine below, the district court did not err by finding that TLG was IES’s alter ego
and was thereby bound by the CBA). We therefore proceed to consider the remaining issues that
defendants raise on appeal, and ultimately remand to the district court to determine the effect of this
holding on the damages owed to the Funds.
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Appellants argue that alter-ego liability cannot exist unless the employer had the intent to
evade union obligations at the time the purported alter-ego entity was formed. This, however, is
inconsistent with our precedent. In Allcoast, the panel weighed the approaches of other circuits and
concluded that “a finding of employer intent is not essential or a prerequisite to imposition of alter
ego status,” but rather, is “merely one of the relevant factors.” Id. We recently reaffirmed this
holding, stating that “evidence of an intent to evade, when it presents itself, is a relevant factor to be
considered in determining whether the alter ego doctrine is applicable, . . . but it is not essential to
the imposition of alter ago status.” Detroit Carpenters, 581 F.3d at 319 (citing Allcoast, 780 F.2d
at 581; Fullerton, 910 F.2d at 337).9
The district court found that TLG was an alter ego of IES based on, among other things, Julie
Llamas’s management work for both IES and TLG, substantial similarities in business and purpose,
overlap in work force, and the fact that the entities shared administrative expenses on paper only.
Further, the district court determined that IES avoided paying substantial overtime by having laborers
work directly for TLG rather than subcontracting through IES. Although defendants analyze each
factor separately to support their argument that TLG was not the alter ego of IES, the law clearly
indicates that the test under the alter-ego doctrine is flexible and that no one factor is determinative.
Id. at 318 (“In applying [the alter ego] factors, no individual factor is outcome determinative; instead
9
The panel in Detroit Carpenters noted the apparently conflicting statements in Trustees
of the Resilient Floor Decorators Insurance Fund v. A&M Installations Inc., 395 F.3d 244 (6th Cir.
2005), but “confined [Resilient Floor] to its facts” to the extent it conflicted with Allcoast and
Fullerton, noting that, for several reasons, Resilient Floor “is of limited authority.” Detroit
Carpenters, 581 F.3d at 319. Thus, defendants’ extensive reliance on Resilient Floor is misplaced.
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‘all the relevant factors must be considered together.’” (quoting Allcoast, 780 F.2d at 582)). The
record contains substantial evidentiary support for the district court’s finding that IES and TLG have
substantially identical management, business, purpose, operation, supervision, and ownership. Thus,
we cannot find the district court’s determination clearly erroneous.
C. Reimbursement for Overpayment
The ERISA statute provides that “the assets of a plan shall never inure to the benefit of any
employer and shall be held for the exclusive purposes of providing benefits to participants in the plan
and their beneficiaries and defraying reasonable expenses of administering the plan.” Whitworth
Bros. Storage Co. v. Central States, Southeast and Southwest Areas Pension Fund, 794 F.2d 221,
235-36 & n.23 (6th Cir. 1986) (“Whitworth I”) (quoting 29 U.S.C. § 1103(c)(1)) (emphasis in
Whitworth I). The statute recognizes, as an exception to this prohibition, that “if such contribution
or payment is made by an employer . . . by a mistake of fact or law . . . paragraph (1) shall not
prohibit the return of such contribution or payment to the employer . . . .” Id. (quoting 29 U.S.C.
§ 1103(c)(2)(A)(ii) (emphasis added). Relying on the non-mandatory language of this exception,
we have stated that “[e]mployers who pay mistaken contributions have no . . . [inherent] entitlement
to a refund.” Teamster’s Local 348 Health & Welfare Fund v. Kohn Beverage Co., 749 F.2d 315,
321 n.6 (6th Cir. 1984). As we have noted,
To impose . . . a requirement [to return mistaken contributions] by implication would
violate the underlying statutory scheme. ERISA’s primary purpose is to protect the
integrity of the pension funds for the benefit of employees and their beneficiaries. . . .
To impose a right to restitution in favor of employers could severely undermine the
funds’ integrity. Mistaken contributions, once invested, may be just as essential to the
funds’ integrity and stability as non-mistaken contributions. . . . ERISA surely did not
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intend to impose the risk of mistaken contributions on the funds, particularly since
the employer is in the best position to monitor the amount of its own contributions.
Whitworth I, 794 F.2d at 231.
At the same time, we have recognized a limited right of action under federal common law
for equitable restitution of mistaken payments. See id. at 235-236 & nn.23-24 (“An action for unjust
enrichment, equitable in nature, and developed in light of the policies of ERISA is appropriate.”
(quoting Airco Indus. Gases v. Teamsters Health & Welfare Pension Fund, 618 F. Supp. 943, 951
(D. Del.1985)) (emphasis added)); see also Whitworth Bros. Storage Co. v. Central States, Southeast
and Southwest Areas Pension Fund, 982 F.2d 1006, 1010, 1013 (6th Cir. 1993) (“Whitworth II”).
The burden on employers seeking equitable restitution is demanding. See Whitworth I, 794 F.2d at236 n.24 (“Congress, in weighing the interests implicated in the context of employee benefit plans,
has favored the financial soundness of the plan and held employers to high standards of
accounting.”).
Specifically, an employer seeking equitable restitution must affirmatively establish that: “(1)
[the employer] paid contributions to [the Funds] which [the employer] was not obligated to pay
pursuant to the collective bargaining agreement . . . ; (2) [the employer] requested refund of the
contributions; (3) [the Funds] denied the refund; and (4) such refusal . . . was arbitrary and
capricious.” Id. at 236 n.25; see also Frank Ciminelli Constr. Co. Inc. v. Buffalo Laborers
Supplemental Unemployment Benefit Fund, 976 F.2d 834, 835 (2d Cir. 1992) (stating that “an
employer is entitled to repayment if it shows that the refusal to repay was arbitrary or capricious and
the equities favor restitution,” and noting that “particular concern must be given to the effect on the
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
financial stability of the fund”) (internal quotation marks omitted)); Award Serv., Inc. v. N.
California Retail Clerks Unions and Food Employers Joint Pension Trust Fund, 763 F.2d 1066,
1069 (9th Cir. 1985) (same). In addition to meeting these requirements, defendants must show that
their gratuitous contributions were the result of “a mistake of fact or law” to come within the
permissive exception to the statute’s outright ban on payment of plan assets to an employer. 29
U.S.C. § 1103(c)(2)(A)(ii); see also Whitworth II, 982 F.2d at 1010-11.
Here, as the district court found after trial,
the defendants have offered no evidence as to why the mistaken payments were made
initially, they have not shown what effect restitution in the amount sought would
have on the plans’ assets and obligations, and they have not demonstrated a reason
for the plans’ refusal to voluntarily refund or credit the payments, much less that the
plans’ rationale was arbitrary and capricious.
Consequently, the district court held that defendants had failed to meet their burden and were not
entitled to equitable restitution. Our review of the record satisfies us that the district court did not
abuse its discretion in so concluding.
CONCLUSION
For the reasons described above, the judgment of the district court is AFFIRMED in part,
REVERSED in part, and REMANDED for further proceedings consistent with this opinion.
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Laborers Pension Trust Fund v. Interior Exterior Specialists Co.
COLLIER J., dissenting in part. I concur with the majority’s conclusions the district court
did not clearly err in finding TLG was the alter ego of IES and IES was not entitled to restitution.
Unlike the majority, I would affirm the district court in its decision IES failed to unequivocally
communicate its intent to terminate the CBA. Therefore, I must respectfully dissent from that portion
of the opinion.
As the majority states, “Congress intended through ERISA to ‘give [covered] plans the upper
hand in . . . litigation in order to permit “efficacious[ ]” recovery of “delinquent contributions,”’”
Plumbers & Pipefitters Local Union No. 572 Health & Welfare Fund v. A & H Mech. Contractors,
Inc., 100 F. App’x 396, 402 (6th Cir. 2004) (quoting 126 Cong. Rec. 23,039 (1980)). Section 515
“permit[s] multiemployer plans to ‘rely upon the terms of collective bargaining agreements and plans
as written, thus “permitting trustees of plans to recover delinquent contributions efficaciously, and
without regard to issues which might arise under labor-management law.”’” Bakery & Confectionary
Union & Indus. Int’l Health Benefits & Pension Funds v. New Bakery Co. of Ohio, 133 F.3d 955,
959 (6th Cir. 1998) (quoting Cent. Penn. Teamsters Pension Fund v. McCormick Dray Line, Inc.,
85 F.3d 1098, 1103 (3d Cir. 1996)). The reason Congress gives this advantage to these covered
plans is because “employee benefit plans frequently remain obligated to pay benefits to employees
even when employers do not make their required contributions[.]” Plumbers & Pipefitters, 100 F.
App’x at 402.
An employer can terminate its obligations under a CBA only “if it (1) unequivocally
withdraws from the association (2) . . . before negotiations for a new contract begin (3) by
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communicating the intent to withdraw to all parties.” Id. at 400 (quoting Sheet Metal Workers’ Int’l
v. Herre Bros. Inc., 201 F.3d 231, 244 (3d Cir. 1999)). Although a court may conduct a “superficial
inquiry” into a purported termination to determine if it was timely and conveyed the requisite intent,
“if the issue of termination cannot be resolved through cursory review, the defense to a section 515
action will not succeed.” La. Bricklayers & Trowel Trades Pension Fund & Welfare Fund v. Alfred
Miller Gen. Masonry Contracting Co., 157 F.3d 404, 409 n.12 (5th Cir. 1998).
The majority concludes the March 28, 2003 letter from Julian Llamas to Scott Covington
suffices to unequivocally communicate IES’s intent to terminate the CBA. This is where I must part
company. The majority’s position is a reasonable interpretation of the letter but there are other
reasonable interpretations including that IES was merely positioning itself for more acceptable terms.
Because there are other equally reasonable interpretations of the language, I cannot agree the
language is unequivocal. The standard by which termination notices must be judged is strict because
Congress intended to allow employee benefit plans to rely on the language without having to resort
to litigation. Thus, courts require unequivocal language in conveying an intent to terminate. If there
is any doubt as to the intent to terminate, the notice fails.
Because I find the language used by IES in its notice does not unequivocally convey its intent
to terminate the CBA, I would affirm the district court’s grant of summary judgment and would find
IES was bound by the 2003 to 2006 CBA. Therefore, I respectfully dissent from that portion of the
majority opinion.
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