Resilient Floor Covering Pension Fund v. Three Rivers Flooring, Inc.

Background

The Resilient Floor Covering Pension Fund and the Board of Trustees of the Resilient Floor Covering Trust Fund sued Three Rivers Flooring, Inc. and Quality Contracting Services, Inc. The plaintiffs sought withdrawal liability under the Multiemployer Pension Plan Amendments Act, a federal law governing certain pension obligations when an employer withdraws from a multiemployer pension plan.

The plaintiffs asserted two theories. First, they argued that Three Rivers was Quality’s successor employer and therefore could be liable for Quality’s withdrawal liability. Second, they argued that Three Rivers and Quality were alter egos—legally separate companies that should be treated as one because of their relationship and alleged use to avoid collective-bargaining obligations.

Quality failed to appear, and the clerk entered a default against it on November 7, 2018. The court later denied the plaintiffs’ motion for default judgment because entering judgment against Quality would necessarily bind Three Rivers and prevent it from disputing the amount of withdrawal liability it might owe.

Summary-judgment standard

The plaintiffs moved for summary judgment against both defendants. Summary judgment is appropriate only when there is no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law. The court must leave credibility determinations, weighing the evidence, and reasonable factual inferences to the factfinder when the evidence could support the opposing party’s position.

Successor-employer claim

The court identified whether Three Rivers took over the bulk of Quality’s customer base as central to the successor-liability analysis. The parties agreed that Quality’s collective bargaining agreement barred it from working with non-union subcontractors and that all of Three Rivers’s brokers were also brokers for Quality or had acquired a broker’s assets.

The parties disputed whether Three Rivers serviced non-union customers that Quality could no longer serve because of its collective bargaining agreement. Three Rivers argued that its customer base differed from Quality’s because the brokers served different end customers and both companies operated and grew during part of the same period. The plaintiffs argued that the companies shared a customer base because they used the same brokers.

The court found the evidence disputed and unclear. It also identified a factual and potentially legal question about whether the relevant customer base consisted of the brokers, the end customers, or both. In addition, the court found a separate factual issue about whether Three Rivers had actual notice of Quality’s withdrawal liability before becoming its successor.

Alter-ego claim

For alter-ego liability, the plaintiffs had to show common ownership, management, operations, and labor relations, as well as use of the non-union company in a sham effort to avoid collective-bargaining obligations.

The parties disputed whether Quality and Three Rivers had common ownership and management. Some California state documents indicated common ownership, but testimony identified Paiva as Quality’s owner and Rodriguez as Three Rivers’s owner. Three Rivers also presented evidence that the companies operated alongside each other from 2010 through 2014, either competing or serving different customers, before Quality went out of business. The court found a material factual dispute concerning ownership and management.

Ruling

Judge William H. Orrick denied the plaintiffs’ motion for summary judgment. The court concluded that triable factual issues existed regarding both successor liability and alter-ego liability, and stated that the matter would proceed to trial.